German Consumer Confidence Rises on Oil-Price Drop

By Gabi Thesing

Oct. 28 (Bloomberg) -- German consumer confidence unexpectedly rose for a second month as a drop in oil prices left households with more money to spend.

GfK AG's index for November, based on a survey of about 2,000 people, increased to 1.9 from 1.8 in October, the Nuremberg-based market-research company said in a statement today. Economists expected the gauge to drop to 1.5, according to the median of 16 estimates in a Bloomberg News survey.

Inflation slowed in September and the price of oil has more than halved since a July peak of $147.11, boosting households' disposable income. At the same time, a deepening crisis on global financial markets has sparked fears of a recession, curbing consumers' willingness to spend, GfK said.

``Many Germans are playing a waiting game as far as their purchases are concerned,'' GfK said in the statement. While oil- price declines have ``supported income expectations,'' the ``panic on the international stock exchanges has shaken consumer confidence in the future economic outlook.''

A gauge measuring economic expectations plunged to minus 27.5 from minus 15.7 and a measure of consumers' propensity to buy dropped to minus 18.2 from minus 12.8. Income expectations rose to minus 12.9 from minus 14.1.

The worst U.S. housing slump since the Great Depression has pushed up the cost of credit globally and caused stock markets to tumble. The world's biggest financial companies have posted more than $670 billion in writedowns and credit losses since the start of last year after the subprime mortgage market collapsed.

`Extreme Turbulence'

``Up to now, consumers have reacted extremely calmly to the extreme turbulence on the international financial markets'' due to low share ownership and a stable labor market, GfK said. ``It is very much hoped that consumers regain their confidence in the financial markets and that a recession can be avoided.''

Private consumption will stabilize through year's end or even rise slightly as falling oil prices push down inflation, the Economy Ministry said after GfK published its report. The impact of the financial crisis and of economic cooling on consumer confidence has been only slight, it added.

Still, consumption will no longer get a boost from the growth in employment, the Berlin-based ministry said.

German business confidence declined to the lowest level in more than five years in October as the financial crisis dimmed the outlook for economic growth, the Munich-based Ifo institute said yesterday.

German Chancellor Angela Merkel's government has slashed its growth forecast for Europe's biggest economy next year to just 0.2 percent.

To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net