German consumer confidence is edging higher after stagnating for several months, but rising unemployment is a risk to any broader pick-up in Europe’s biggest economy, a key survey showed yesterday.
The widely-watched GfK economic institute index rose to 2.9 points for next month from a revised 2.6 points this month. Analysts had forecast next month would come in at 2.5 points, the same reading on the report since March.
“Despite the economic crisis, consumers are in the mood to buy,” a GfK statement said.
However, “the real test is yet to come, given the likelihood of rising unemployment in the months ahead,” the institute said.
GfK’s survey of about 2,000 consumers measures overall sentiment as well as personal income expectations, views of the economy in general and the propensity to make major purchases.
Hopes for a stabilization of the economic downturn have gained ground among consumers, it said. A separate Ifo group study released on Monday showed German companies were also getting over their recession blues and beginning to see a stabilization of business activity.
Ifo’s index for June rose for a third straight month to reach 85.9 points, the highest reading since November when Berlin unveiled the first of two huge stimulus packages.
“Following the recent growing number of signs that the economic downturn may be coming to an end, consumer hopes of economic stabilization are intensifying and accordingly, economic expectations are increasing moderately,” GfK said.
But its main index reading remained at a low level and questions remained as to whether German consumers were really poised for a steady rise in confidence in light of the uncertain unemployment outlook.
Germany’s economy contracted by a record 3.8 percent in the first three months of this year and is forecast to shrink by 6 percent this year, which would be its biggest slump since 1945.
Private consumption was the only component that contributed significantly to economic activity in the first quarter.
A breakdown of the consumer survey results showed expectations concerning personal revenue jumping six points to minus 3.3 points, owing to inflation which is now at zero and an increase in pension payments on July 1, GfK said.
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