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Consumer confidence stabilises in Germany

German consumer confidence increased in January despite the global financial crisis and reports that the country has entered its worst recession since World War II, Nuremberg-based market research institute GfK reported on Wednesday.

Consumer confidence stabilises in Germany
Photo: DPA

The institute’s consumer climate indicator predicted an index of 2.2 points for February, the same rating that January received and a sign that it is stabilising, though it is still low, the institute said.

A part of the survey found Germans were more willing to spend money but worried about losing their jobs or being put on shorter working hours made them gloomy about their earning prospects, the GfK said.

The survey also found consumers pessimistic on immediate prospects for the economy although findings suggested consumers thought the worst might be over.

The job market will be a “top theme” for consumers in the development of the economy for the next year, GfK expert Rolf Bürkl told news agency DPA, adding that inflation will not be as much of a factor. “The fear of joblessness has always emerged as a brake on consumerism,” he said.

Lower inflation has been good for consumer disposition, he said. “The low petrol prices make for a good atmosphere,” Bürkl said, adding that the government’s efforts at financial rescue packages have also been a relief.

The German economy is expected to contract by around 2.25 percent this year due to a slump in global demand for goods from the world’s largest exporter.

On Tuesday the German cabinet approved a €50-billion stimulus package that promises to pump funds into infrastructure in hopes of stemming a recession.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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