After last week’s disastrous UK GDP report, here’s another signal that the fragile recovery has the potential to backslide — or at least people fear it will, which could be self-fulfilling.
By MATT MOORE, AP Business Writer
FRANKFURT (AP) — German consumer confidence for November fell slightly for the first time in more than a year due to worries about job losses, a forward-looking survey by the GfK market research group said Monday.
The group, based in Nuremberg, said its overall indicator for November fell to 4 points from a revised 4.2 points in October as more Germans worried that unemployment may grow in coming months.
“As a result of reports over the past few weeks that the economy in Germany could recover more quickly than previously forecast, the economic outlook is being assessed more optimistically,” GfK noted in its monthly report.
“However, not unexpectedly, Germans are viewing their own economic situation with slightly less confidence against the background of increasing problems on the labour market, although the feared slump in employment has so far failed to materialise,” the group said.
GfK said also that consumers’ propensity to buy had also decreased amid expectations that income would be down.
“One reason for this is certainly the discontinuation of the scrapping bonus at the end of September,” it said, referring to Germany’s euro5 billion ($7.5 billion) cash for clunkers program.
The economic expectations reading jumped more than 5 points in October to 8.7 points from 3.4 points the month before, its seventh increase in a row.
But consumers’ income expectations dropped to 12.9 points from 16 points in October, halting four months of gains.
“Despite this slight setback, private consumption remains the major source of support for the German economy this year, since investments and exports will record large decreases at the close of 2009,” GfK said.
Looking forward, the group said that any rise in unemployment in Germany, Europe’s biggest economy, would “have a negative impact on the domestic economy. However, owing to the slightly brighter economic outlook for 2010, it is to be hoped that the originally feared slump in employment will not occur, and that unemployment will climb less steeply than predicted. “
German unemployment — now at 8.3 per cent, with about 3.5 million people out of work — will probably increase in coming months, especially as government-backed short-time work programs expire.
The economy returned to modest growth in the second quarter and business confidence is rising, but Germany’s gross domestic product is still expected to shrink by 5 per cent or more this year — easily the worst performance since World War II, as demand for the country’s exports slumps.
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