German consumer confidence has fallen for the first time since October last year, a key survey showed yesterday, after Europe’s largest economy fell into recession while inflation remained stubbornly high.
Pollster GfK said its forward-looking survey of about 2,000 people fell to minus-25.4 points next month from minus-24.4 points this month.
The drop is the first since October, when the barometer hit a low of minus-42.8 points, as inflation soared and consumers worried about the cost of heating their homes over the coming winter.
Photo: AP
Consumer confidence bounced back as energy prices stabilized, but the economic outlook has remained clouded.
Inflation has come down from its peak late last year, but remained high last month at 6.1 percent.
Meanwhile, the German economy recorded its second straight quarter of negative growth over the first three months of this year, pushing it into recession.
The drop has left Germany’s top economic institutes predicting the economy would shrink 0.2 percent over the course of the year.
The decline in consumer confidence “indicates that consumers are becoming increasingly unsettled again,” GfK expert Rolf Buerkl said in a statement.
“Continued high inflation rates of about 6 percent are noticeably pinching households’ purchasing power,” he said.
The pessimism among consumers could lead them to rein in spending and keep them from “making a positive contribution” to economic growth in Germany this year, the GfK said.
“A ray of hope could be the trend in recent months that inflation rates are falling further,” it said.
The loss in purchasing power would still weigh on households, but the pain would be “less serious than originally feared,” it said.
Separately, European Central Bank (ECB) Vice President Luis de Guindos yesterday said that while another interest rate increase next month is all but assured, the outcome of the following meeting remains unclear and would be determined by economic data arriving in the interim.
Guindos told Bloomberg TV that underlying inflation pressures might prove to be more stubborn than currently expected, with a strong summer tourist season likely to drive service costs higher.
“I think July is a fait accompli,” Guindos said in Sintra, Portugal, where the ECB is holding its annual retreat. “In September, I think that it’s open.”
Additional reporting by Bloomberg
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