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German GFK Consumer Confidence Slips for the Fourth Month
Mon, Jan 25 2010, 07:38 GMT
by ecPulse.com analysis team
This year is expected to witness some volatility in data released after the deterioration seen in the last two years. Recovery road will require more time to be maintained in the euro zone’s economies to get rid of the negative consequences of the global downturn.
Today, Germany released its GFK consumer confidence for the month of February coming in at 3.2% from 3.4%. Confidence declined despite the improvement signaled since the second quarter of 2009, where the economy emerged from recession through expanding 0.4%, followed by 0.7% expansion in the third quarter because of fears from other threats surrounding recovery.
The reading slumped for the fourth month as households are afraid of losing their income with the expected rise in unemployment. Jobless rate for January released later on this week is expected to rise to 8.2% from 8.1%. Number of people out of work retreated recently but expectations are in favor of an incline by the end of the current year.
Many companies shed jobs to cut costs to return to profitability. For instance, Siemens AG announced previously that it has slashed the number of workers from all its affiliates to 408,000 this year from roughly 420,000. Also, there are other companies planning to terminate more employees which may cause the number to become frightening in the coming period. German jobless rate is expected to climb to 9.2% in 2010, according to the Organization for Economic Cooperation and Development announced in November.
Also, we might see unwinding of stimulus measures after the recovery signs seen and increase in inflation. Chancellor Angela Merkel’s government is spending near 85 billion euros on infrastructure projects in addition to the 2,500-euro payment junking old cars and buying new ones (cash-for-clunkers) as well as tax cuts.
These measures may be withdrawn by the second half of the current year in addition to the stop of the non-standard measures used by the ECB. Thus, there might be a slowdown after exiting stimulus as the economy will depend solely on itself.
On December 16, two German economic institutes raised growth forecasts for Germany in 2010; the IFW institute said the economy will expand 1.2% from 1%, while the IMK institute mentioned that it will grow 2%.
Later on this week, Germany will release IFO and CPI for January which may give a clearer picture about the performance of the largest economy in the euro zone this year.
Although the outlook is optimistic but other external fears are also threatening recovery in the euro zone. The high budget deficit in Greece is most annoying to the ECB in this period as it mentioned that the Greece has to depend on itself without any support from the bank or other large economies in the region such as Germany.