Germany: Consumer confidence slips for third consecutive month
May 25, 2011
Consumer sentiment deteriorated in May, amid concerns that the debt crisis in Greece is far from over and that energy prices will remain elevated. In June, the forward-looking consumer confidence indicator published by the GfK Institute fell to 5.5 points from 5.7 points in May, undershooting private sector analysts' expectations, which had seen the index inching down to 5.6 points. The fall represented the third straight month of declining consumer sentiment, after the index hit a record high in March. Together with overall consumer climate indicator, which refers to June, the GfK Institute also published three sub-indices (economic expectations, income expectations and the propensity to buy), which refer to May. According to the survey, all sub-indices fell over the previous month. Economic expectations deteriorated, as consumers are still concerned about stability in North Africa and the Middle East and a potential worsening of the debt crisis in some European countries, which, according to the GfK, are likely to have a negative impact on economic optimism in the months to come. In addition to less propitious economic prospects, income expectations fell over the previous month, amid consumers' increasing fears that rising prices, in particular energy and food prices, are likely to dent households' income. The propensity to buy declined slightly over the previous month, on the back of falling economic and income expectations. However, the buying propensity remains relatively high, suggesting that consumers remain comfortable with current levels of economic development in the country and the improving situation in the labour market. In May, the unemployment rate fell to 7.0% from 7.3% in April, which marked the lowest level since records began for a unified Germany. According to the GFK Institute, the strength of the labour market provides security for those consumers planning for larger purchases in the months ahead.
Author: Ricardo Aceves, Senior Economist