BERLIN, Aug 29 - German consumer sentiment is seen improving in September, another indication that Europe's largest economy may be edging out of recession, but shoppers are still cautious as unemployment remains high. Market research company GfK said on Friday its consumer sentiment indicator for September inched up for a third month in a row to 4.8, adding to a raft of positive survey data on prospects for the German economy.
"Consumers continue to believe the German economy will recover. For the third time in a row, economic expectations have improved," Rolf Buerkl, a researcher for the Nuremberg-based GfK, said in a statement. "This future optimism is not without foundation. On the one hand the U.S. economy is strengthening after a period of stagnation and this could give impetus to the German economy." Sentiment indicators have generally painted a positive picture on the outlook for the German economy but many analysts are waiting for meaningful evidence that the situation on the ground is improving before calling a real upturn. The GfK warned the situation remained difficult in Germany. "This rising optimism is based a lot less on the current difficult situation in the German economy than it is on hopes that things will improve," Buerkl said.
THINGS STILL TOUGH
The closely watched Ifo business sentiment index for August rose for the fourth consecutive month and the ZEW survey was also positive, although Ifo pointed out in its survey that German retailers turned gloomier again during August. Data from the federal statistics office showed how tough business remained for German shops and department stores. Retail sales in July fell 1.6 percent month on month and 2.2 percent on the year in real, or inflation-adjusted, terms. In the first seven months of this year, retail sales fell by 0.2 percent versus the same period a year ago.
A report in Friday's Die Welt newspaper said the weak economy pushed the August jobless total up 310,000 from a year ago, bringing it to its highest level in August since 1997. However, citing Labour Office data, it said headline unemployment should fall 20,000 from July. "It's no surprise that consumers are holding back considering the labour market remains so weak right before their eyes," said Bernd Weidensteiner at DZ Bank. "When people in German feel insecure, they save money, while in America it seems they prefer to go shopping," he said. "In overall terms you can write the economy off for this year. The initial impetus will yet again have to come from abroad, as is the tradition here," said Weidensteiner. GfK said its latest survey showed plans to bring forward some 15.5 billion euros worth of tax cuts to 2004 and government plans to reform the social welfare system had given consumers' expectations a boost. However, consumers were worried about how planned tax cuts would be funded, while a discussion about cutting tax breaks for commuters and other subsidies had hit income expectations. Germans also remained unwilling to spend money because of uncertainty about what impact social welfare reform would have on their contributions, GfK said.//