Wednesday 17 January 2018

German consumer confidence slips on economic slowdown

German consumer sentiment is set to decline for a second straight month this October, as fears over conflict between Ukraine and Russia weigh on optimism

German chancellor Angela Merkel with Russian president Vladimir Putin
German chancellor Angela Merkel with Russian president Vladimir Putin

Peter Spence

Tensions over Russia and Ukraine have rocked Germany’s shoppers, pushing measures of consumer confidence for October to an eight-month low

At just 8.3, the GfK consumer sentiment reading was 0.3 points weaker than in September, and 0.2 points lower than analysts had predicted.

The decline in sentiment followed a “major slump” in the previous month, said GfK, as consumers reported concerns over “the ongoing tense geopolitical situation and economic weakness in a number of eurozone countries”.

“The ceasefire in eastern Ukraine seems to be largely holding,” said Holger Schmieding, chief economist at Berenberg, “but the economic fall-out of the conflict remains serious”.

The weak reading has dealt a blow to European markets, rattling shares in early trading.

Berenberg now expects to see that both German and eurozone economies will expand by no more than 0.1pc in the third and final quarters of 2014.

Vladimir Putin, Russia’s president, “has interrupted the eurozone upswing”, said Mr Schmieding.

The poor figures are the latest in a series of gauges to head south, and were “consistent with the drop in the European Commission’s consumer confidence the euro area as a whole, said Emily Nicol, of Daiwa Capital Markets.

Recent data showed that Germany’s factories are in a worse state than any analyst had imagined, as they are expected to see a meagre increase in production this September.

Germany’s economy remains particularly exposed to anxiety over Ukraine, and the tit-for-tat sanctions exchanged between Russian and the EU.

Those sanctions have hit “only minor parts” of western Europe’s economy, said Mr Schmieding. Rather, “uncertainty is weighing on investment”, and is the primary cause of the area’s economic pain.

French household confidence remained “stable” in September, according to statistics agency INSEE.

The agency’s measure of sentiment has remained static since July, remaining “significantly below its long-term average”, as French households have become “more pessimistic regarding future unemployment”.

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