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German consumer trust declines to five-year low
Published in The Saudi Gazette on 29 - 07 - 2008

Consumer confidence in Germany, Europe's biggest economy, dropped to the lowest in more than five years as soaring energy prices sapped purchasing power and the economic outlook deteriorated.
GfK AG's index for August, based on a survey of about 2,000 people, fell to 2.1, the lowest since June 2003, from 3.6 in July, the Nuremberg-based market-research company said in a statement today. Economists predicted the gauge would fall to 3.5 from an initial July estimate of 3.9, according to the median of 25 estimates in a Bloomberg News survey.
Record oil and food prices pushed inflation in Germany to 3.4 percent last month, squeezing disposable incomes just as the euro's gains and a deepening US housing slump curbed demand for exports. Business confidence dropped the most since the Sept. 11 terrorist attacks in 2001 and investor confidence fell to a record.
“Three things are weighing on sentiment: inflation, inflation and inflation,'' GfK Chief Executive Officer Klaus Wuebbenhorst said in an interview on Bloomberg Television. “And the European Central Bank raising rates also makes consumer loans more expensive.”
European government bonds rose after today's report, with the yield on the two-year note declining 1 basis point to 4.41 percent by 7:16 a.m. in London. The euro traded at $1.5710, little changed from July 25. Germany's DAX stock index fell more than any other European benchmark, dropping as much as 1.4 percent, to 6346.05.
A sub-index measuring income expectations decreased to minus 20 from minus 7.2 and a gauge of consumers' propensity to spend fell to minus 26.2 from minus 23.7. A measure of economic expectations plunged to minus 8 from 7.5. Praktiker AG, the second-largest home-improvement retailer, in Germany cut its full-year sales growth forecast on July 23.


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