German morale hit by rising unemployment
According to the GfK market research group, consumer confidence in Germany is waning after the group’s climate index stood at 3.2 points in February, falling from a revised 3.4 in January.
The forward-looking consumer confidence indicator, which is based on a survey of 2,000 Germans, is being hit by the fear of rising unemployment which is putting incomes under pressure.
This is partly due to the Government’s “Kurzarbeit” scheme, which was introduced to prevent mass redundancies which has seen hundreds of thousands of Germans moved to part-time work.
Commenting on the index, Carsten Brzeski of ING Financial Markets, said: “Looking ahead, a spending spree seems rather unlikely given Germans’ inclination to save.”
Germany, which is Europe’s largest economy, contracted by a record 5% in 2009 – the first time in six years the economy had shrunk and the deepest since World War II.
The record contraction was due to a slump in demand in exports and investment.
In 2009, exports plunged by 14.7% on the year, while investment in equipment fell by one fifth.
The fall in exports also led to Germany losing its status as the world’s largest exporter as China overtook it in this field.
However, Germany was one of the first major economies to exit recession after experiencing positive growth in the second quarter of 2009.
The economy expanded by 0.7% quarter-on-quarter in the third quarter of 2009 and by 0.4%.
The German Government is predicting growth of 1.2% in 2010 and economists are cautiously optimistic about Germany’s growth prospects.
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