28 July 2004, 10:41  German consumer sentiment to drop in August - GFK

German consumer confidence is set to drop sharply in August as cost-cutting plans at big companies stoke income worries, dampening already weak domestic demand, market research group GfK said on Wednesday. In its monthly survey of 2,000 Germans, GfK said this meant consumers would not boost economic growth in Europe's largest economy this year. "This confirms the fear -- long since expressed -- that private consumption will not provide any effective drivers for overall economic growth this year," GfK said in a statement. The Nuremberg-based firm's forward looking consumer sentiment indicator fell to 3.4 in August from a downwardly revised 3.9 in July, its lowest reading for a year. Klaus Schruefer, an economist at SEB in Frankfurt, said the GfK data showed there was a dichotomy in the German economy.
"The economy remains split," said Schruefer. "We have strong impulses from exports but as this shows, domestic demand remains moderate. Thus overall, there is reason to be confident on German economic growth, but not over-optimistic." Analysts polled by had expected the figure of 5.0 originally reported for July to be unchanged in August. GfK has revised down the numbers in its consumer sentiment indicator series extensively in recent months. Data not subject to revision showed that consumers' expectations for the economy fell to minus 20.5 in July, the lowest level since May 2003, while income expectations dropped more than seven points to hit a six-month low of minus 14. Recent moves by firms such as car maker DaimlerChrysler to save jobs and cut costs by extending working hours without raising wages had influenced consumers more than the growing optimism among economists about Germany's 2004 growth outlook, GfK said.
"The current debate at DaimlerChrysler over domestic cost saving (and the reduction in job benefits linked to this) contributes to the fact that this may end up being an issue not just at Daimler, but also in other areas," it said. The GfK survey also showed the July component detailing consumers' "willingness to buy" fell sharply to minus 37.4, after posting its best reading since December 2001 in June. Most of Germany's leading economic research institutes have revised up their 2004 German growth forecasts to around 1.8 percent and Bundesbank President Axel Weber said on Monday he expected the economy to grow 0.5 percent in the second quarter. Optimism has been fuelled by strong export growth, but private consumption, which has declined for the past two years, remains weak amid stubbornly high unemployment and continuing public debate over health and welfare reforms. "Many Germans obviously assume that they will be the losers in the reform discussion and thus continue to hold back on spending," GfK said. "Above all, exports will again have to prop up the economy by themselves this year."///

© 1999-2024 Forex EuroClub
All rights reserved