In Germany, the overall consumer morale is set to show a slight deterioration in April despite too many negative reports regarding economic development. Further changes in consumer climate over the months ahead remain dependent on labor market situations.
The overall consumer confidence index is forecasting a value of 2.4 points for April, down from a revised 2.5 points reported in March, a survey conducted by the GfK market research group showed Thursday. Economists were expecting a reading of 2.5 for April.
The Nuremberg-based GfK group conducts the GfK consumer climate MAXX survey each month on behalf of the EU Commission. The survey is based on around 2,000 consumer interviews.
The consumer confidence index of GfK corresponds to the coming month, while its three sub-indices namely economic expectations, income expectations and propensity to buy refer to March.
Economic expectations of consumers eased in March on pessimistic economic forecasts and plunging production and exports. Fear of job losses also is overshadowing the positive impact of the second stimulus package. The index dropped to minus 32.8 in March from minus 27.9 last month. The index stood well below last year's level of 15.
Following a positive development in February, income expectations remained virtually stable for March. Income expectations decreased 0.4 points to the current level of minus 11.4 points. Slowing inflation and discount sales strengthened consumers' purchasing power. After the completion of the current survey, legislators agreed upon the pension increase, which would further boost pensioners' income and possibly will have a stabilizing effect on income expectations in the future.
Propensity to buy remained at a positive level in March. The index stood at 13.9 points, which was 24 points above the level recorded at the same time in the previous year. Last month, the index reading was 14.6. The low rate of inflation and financial incentives from government are all having a positive effect on propensity to buy. In addition, retail traders are supplementing with their own promotional activities. Many car manufacturers are creating buying incentives by offering further concessions to complement the government's bonus for scrapping old cars.
Yesterday, the Fitch Ratings confirmed Germany's long-term foreign and local currency Issuer Default Rating at 'AAA' and gave a stable outlook for both the ratings. Fitch expects general government deficit to rise to 4.5% of GDP by 2010. The rating agency also estimates the economy to contract by nearly 4% in 2009.
Earlier in the week, the research institute Essen-based RWI lowered GDP forecasts, saying the GDP will fall 4.3% in 2009 compared to a 2% decline estimated in December. Meanwhile, the think tank IMK reportedly estimated real GDP to fall 5% in 2009. A German daily reported that the government forecasts the economy to contract in the range of 4% to 4.5% this year.
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