German Consumer Confidence Unexpectedly Increases

By Gabi Thesing

Oct. 28 (Bloomberg) -- German consumer confidence unexpectedly increased for a second month as a decline 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, rose 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 a barrel, 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.

Christmas `Not Canceled'

``It's not all bad news,'' said GfK Chief Executive Officer Klaus Wuebbenhorst. ``Slowing inflation and a stable labor market means there is a good bit of money around which should bode well for retailers in the fourth quarter. Christmas is definitely not canceled.''

Low share ownership in Germany also contributed to consumers reacting ``calmly'' to the financial crisis, GfK said. ``It is very much hoped that consumers regain their confidence in the financial markets and that a recession can be avoided.''

German business confidence declined to the lowest level in more than five years in October as the financial turmoil 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