By Gabi Thesing
Nov. 25 (Bloomberg) -- German consumer confidence unexpectedly rose for a third month, defying the recession.
GfK AG’s index for December, based on a survey of about 2,000 people, increased to 2.2 from 1.9 in November, 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 24 estimates in a Bloomberg News survey.
Inflation slowed in October and the price of oil has dropped to $53 a barrel from a July peak of $147, boosting households’ disposable income. At the same time, the deepening crisis on financial markets and the worst recession in 12 years is clouding consumers’ outlook for the economy, GfK said.
“Many Germans don’t yet believe they will be significantly affected by the downturn,” GfK said in the statement. Still, a further improvement would “very much depend on how deep the recession is and how the labor market will be affected.”
Declining heating oil and fuel costs and “the expectation that gas prices will follow suit” is increasing households purchasing power, “giving them room to spend.”
Household consumption rose 0.3 percent in the third quarter from the second, when it declined 0.6 percent, the Federal Statistics Office in Wiesbaden said today.
A measure of consumers’ propensity to buy surged to minus 6.7 from minus 18.2. Income expectations rose to minus 6.9 from minus 12.9. A gauge of economic expectations slid to minus 30.1 from minus 27.5. That’s the lowest since 1991, GfK said.
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 incurred almost $1 trillion in writedowns and credit losses since the start of last year after the subprime mortgage market collapsed.
Business Confidence Slump
Companies such as BASF SE, the world’s largest chemicals maker, and carmakers Bayerischer Motorenwerke AG and Daimler AG are scaling back output as orders dwindle. Business confidence slumped to the lowest level in 16 years the Munich-based Ifo institute said yesterday.
Chancellor Angela Merkel’s government has also taken steps to shore up the economy. On Nov. 5 it agreed on a stimulus package aimed at unlocking 50 billion euros ($63 billion) in investment. The two-year program ranges from tax breaks for buyers of new cars to greater financial help for improving buildings’ energy efficiency.
Merkel is now facing growing pressure from members of her party, the Christian Democratic Union, to reduce income taxes to boost consumer spending.
To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net
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