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Business

German consumer mood sags

October 26, 2016

The mood among German consumers has reached its lowest level since April this year, a survey has shown, linking the fall to fears that weakness in the global economy could hurt German growth.

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Konsumklima in Deutschland verbessert sich
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The consumer sentiment indicator, published by the Nuremberg-based GfK institute on Wednesday, fell to 9.7 points heading into November - down by 0.3 points from October.

GfK researcher Rolf Bürkl attributed the lowest reading since April this year to an "increasingly difficult" trade environment. "This weakening of consumer sentiment in Germany is not caused primarily by the hard facts of domestic trends, such as those relating to employment and income levels."

GfK said despite the fall, consumers remained optimistic about the economy. A sub-index measuring economic expectations rose to a reading of 13.0 in October after three successive falls since Britain's vote in June to leave the EU.

"For the first time, consumers seem to have digested the British people's decision to leave the European Union," Bürkl said.

The more upbeat mood about the economy comes as no surprise as the government this month lifted its 2016 growth forecast to 1.8 percent from 1.7 percent.

Record-high employment, rising real wages and ultra-low borrowing costs have boosted the spending power of Germans, making consumption a main driver of growth in a traditionally export-driven economy.

Sub-indexes measuring income expectations and propensity to buy both fell, on concerns about more expensive oil which is pushing up prices, leaving households with less money.

The German economy has been showing positive signs after weak data in July. Exports rebounded in August, recording their biggest rise in more than six years.

In addition, German business morale improved unexpectedly in October, hitting its highest level in 2-1/2 years and suggesting company executives have become more optimistic about growth.

The robust German labor market has resulted in collective wage increases, which coupled with record-low interest rates, continue to encourage spending.

"In light of an extremely stable labor market and solid incomes, the chances are good that domestic demand will continue to be an important pillar of economic development in Germany," Bürkl said.

uhe/jd ( Reuters, dpa)