Even as the clouds of the global financial crisis darken around them, German consumers' confidence posted a surprise but modest rise, a key survey showed. Still, Germans aren't expecting too much good economic news.
Whether retail sales see the same boost as consumer confidence remain to be seen
The Nuremberg-based GfK market research institute's survey, however, showed on Tuesday, Oct. 28, that German consumer expectations about the economic outlook dropping to a five-year low.
The institute's forward-looking consumer confidence index edged up to 1.9 for November from 1.8 in October, helped along by an increase in income expectations on the back of falling inflation.
"Consumers have kept a level head amid the sometimes dramatic developments on the international financial markets, and this is particularly true of their income expectations," the GfK said, releasing its latest survey. "With falling rates of inflation, consumer purchasing power is in less danger of shrinking and income expectations are even increasing somewhat."
Analysts had predicted that the GfK survey for would fall to 1.5 in October in the wake of the world financial crisis, which has resulted in turmoil on global stock markets and raised fears of a looming recession.
However, the survey component measuring economic expectations dropped to its lowest level since May 2003 with the indicator falling by 11.8 points to minus 27.5 points. This about 66 points lower than the same period last year.
"Germans are, therefore, currently in line with a number of financial experts, who believe the German economy is 'on the brink of a recession,'" the GfK said.
As a result, consumers are once again becoming very reluctant to spend, with the survey's component gauging propensity-to-buy indicator dropping by 5.4 points to minus 18.2 points. This is about five points lower than last year.
The release of the latest German consumer confidence survey, which is based on responses from some 2,000 consumers, came in the wake of a key report released this week showing business confidence in Europe's biggest economy falling to its lowest level in five years.