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Spring back in German consumers' step?

AFP · 24 Oct 2014, 08:22

Published: 24 Oct 2014 08:22 GMT+02:00

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Following the recent declines, "consumer sentiment rose again somewhat in October and the downward trend has come to an end," market research company GfK said in a statement.

"Consumers appear to be less unnerved by the ongoing geopolitical tensions and the ensuing economic slowdown. Both income expectations and the willingness to spend have risen again. And the economic expectations are more or less unchanged," GfK added.

Looking ahead to next month, GfK's headline household confidence index was forecast to edge up to 8.5 points in November from 8.4 points in October.

Analysts had been pencilling in a drop in the index next month.

The GfK reading is based on responses from about 2,000 households regarding their expectations about pay and the economy as a whole in the coming months, as well as their willingness to spend money.

Confidence in Europe's top economy has been fading amid concern about the effect on investment of the crises in Ukraine and the Middle East. Recent weeks have seen a slew of negative economic indicators.

At the end of September, the widely watched Ifo business climate index fell to its lowest level in 17 months.

"Near record levels"

However, coming after better-than-expected purchasing managers' index the day before, the German consumer confidence data offered some hope that the euro area is facing "stagnation until the end of 2014, not recession," said Berenberg Bank economist Christian Schulz.

The GfK barometer was "still down a bit on the peak levels of 8.9 right after the World Cup victory this summer, but remains near record levels," he said.

"While the Eurozone has entered a rough patch, a new recession remains a tail risk," he said.

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Unresolved structural problems in France and Italy continued to be a drag on growth, the expert continued.

"By contrast, external uncertainty holding back German business investment could fade and give way to a healthy rebound next year in an otherwise fundamentally strong economy," Schulz said.

BayernLB economist Stefan Kipar also said that despite the negative data from Germany and the eurozone recently, "there is little sign that the German consumer is particularly nervous, thanks to the positive situation on the labour market and solid wage hikes."

As long as the situation on the labour market did not deteriorate noticeably, "positive impulses can continue to be expected from consumption in the second half of the year," Kipar said.

SEE ALSO: How rocky is Germany's economy?

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