For the second consecutive month, fuel price worries have hit Germans' willingness to spend, market research firm GfK has found. Inflation fears overshadow a stable outlook for the labor market.
Consumer confidence in Germany would likely slip to 5.6 points in May from 5.8 points recorded in April, market research company GfK said Friday as it published its monthly household confidence index.
As the forward-looking barometer dropped - though only fractionally - for the second month in a row, GfK said that confidence was mainly eroded by "rising fuel prices causing fears of inflation."
"While households are more optimistic about the general economic outlook, income expectations are down slightly and the propensity to buy has fallen markedly," the institute said in a statement.
The benchmark index surveys responses from about 2,000 German households, including people's expectations about wages, about the general economic situation, as well as regarding their willingness to spend money.
Consumer confidence in March was the highest in 12 months, reaching 6 points as Germans had perceived the eurozone debt crisis easing and the country avoiding a recession.
Noting that inflation fears were "on the rise," GfK said that in particular prices at the pump, which were "rising from one record to the next" were taking their "toll" on consumers.
"Consumers are seeing their purchasing power erode having to spend more and more of their income on energy and petrol," GfK said, adding that Germans' willingness to buy expensive goods was "declining" as they were starting to "save" more strongly again.
However, analysts believe the slight drop in consumer confidence is no reason to worry.
"The German labor market is in stable condition because companies continue to hire. Employees are able to negotiate higher wages which is sure to cause consumer confidence to rise again soon," Thomas Amendt, analyst with HSBC Trinkhaus, told Reuters news agency.
Stressing that she didn't worry about domestic consumption in Germany, Commerzbank analyst Ulrike Rondorf told the same news agency that she expected German wages to "rise faster than inflation" over the next few months.
Last week, the benchmark German IfO business climate index rose for the sixth time in a row, underscoring that the real economic situation in Germany may be better than people perceive it to be.
uhe/sgb (Reuters, dpa, AFP)