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Consumer sentiment steadies after five-month plunge

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Consumer sentiment steadies after five-month plunge
Photo: DPA
09:07 CET+01:00
German consumer sentiment has stabilised after a five-month slide, helped by government efforts to limit the damage from the global economic crisis on employment, the GfK research group said Thursday.

GfK said its consumer confidence index was steady at 3.2 points for April.

GfK acknowledged consumer confidence might just be taking a breather from a downward trend that began with November's reading but noted that both economic and personal income expectations had improved among the roughly 2,000 people surveyed.

"The German labor market is continuing to prove amazingly robust this year," a GfK statement said.

"This stability, in conjunction with increasing signs of a recovery in the German economy, are currently triggering a significant rise in economic optimism among Germans."

Although German unemployment edged higher to 8.7 percent in the latest figures, the impact of the global economic slump has been partly offset by a government plan that subsidises shorter working hours.

On Wednesday meanwhile, the German Ifo economic institute said business confidence soared to near a two-year high in March as Europe's biggest economy emerged from an especially cold and snowy winter.

Consumer sentiment has also been underpinned by government measures such as an increase in family allowances, while rising fuel prices caused an indicator of propensity to buy to drop slightly, the institute said.

Economic activity will therefore benefit relatively little from domestic demand this year, when the government anticipates growth of 1.4 percent following a massive contraction of five percent in 2009.

"Private consumption remains the Achilles' heel of the German economy," ING senior economist Carsten Brzeski said.

"Over the last 10 years, only an announced VAT hike and last year's car scrappage scheme were able to trigger some kind of spending spree."

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