Germany's consumer confidence is set to drop in April as fuel price increases weighed on income expectations, while the easing debt crisis boosted consumers' economic expectations.
The forward-looking consumer sentiment index came in at 5.9 for April, down slightly from a 12-month high of 6 points in March, a survey by market research group GfK showed Tuesday. Economists had expected the score to remain stable at 6 points.
Despite a modest fall in the index, the consistent level of the indicator suggests that private consumption would underpin economic growth this year. The GfK forecasts real consumption to rise 1 percent on average.
Although fuel prices only account for roughly 5 percent of consumer spending, the recent rise in fuel prices dented confidence, ING Bank's Carsten Brzeski said. The negative impact in consumers' wallets combined with the psychological effect of losing one's money at the gas station, remains the main threat for German domestic demand, the economist added.
Economic expectations improved slightly once again in March and the willingness to buy almost remained at the same high level. But income expectations fell, reversing the strong improvement of the previous month.
A slight easing of the debt crisis as a result of the second package for Greece helped to lift consumers' economic expectations. The economic expectations index rose 1.3 points to 7.2.
Nonetheless, the indicator is more than 42 points below the corresponding value in 2011, which suggests that the German economy will be significantly less dynamic in 2012 than in the previous year.
The income expectations index dropped 7 points to 34.3, which virtually negated the rise of 7.2 points in March. Record prices for petrol and diesel was the factor behind the deterioration. Consumers said the current rise in fuel prices threatens their purchasing power.
On the other hand, the willingness to buy showed no dramatic changes in March. The index dipped by 0.6 to 38.6 points. Despite rising inflation and declining income expectations, willingness to buy is remaining at an extremely good level, data showed.
by RTT Staff Writer
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