Bloomberg News

Germany, France Report Improving Consumer Confidence: Economy

January 26, 2012

(For more on the European debt crisis, see EXT4.)

Jan. 26 (Bloomberg) -- German and French consumers are growing more confident, suggesting household spending may temper the slowdown in Europe’s two largest economies.

Consumer sentiment in Germany will increase for a fifth straight month in February, market research company GfK SE predicted today, citing a survey of about 2,000 people. In France, a gauge of confidence unexpectedly advanced to 81 in January from 80 in December, Paris-based national statistics office Insee said. That index remains close to an all-time low.

“The numbers underline the strength particularly in Germany,” said Tobias Blattner, an economist at Daiwa Capital Markets in London. “The crisis is not hurting confidence there. Wages will rise and unemployment will continue to be low, and because of strong trade linkages this demand will spill over into the rest of Europe.”

Signs that the 17-nation euro area may avoid a deep slump give European Central Bank President Mario Draghi time to assess the impact of two interest-rate cuts and record lending to banks. Draghi, who said in November that the region faced a “mild recession,” kept the ECB’s benchmark rate unchanged at a record low of 1 percent on Jan. 12. The U.S. Federal Reserve pledged yesterday to keep rates low through at least late 2014.

The Stoxx Europe 600 Index added 0.7 percent at 12:30 p.m. in Frankfurt. The euro climbed 0.4 percent to $1.3163.

German Unemployment

Unemployment in Germany is at a two-decade low of 6.8 percent, supporting consumer spending and helping to limit the impact of the debt crisis. Business confidence jumped to the highest in five months in January, and the International Monetary Fund said on Jan. 24 that the economy will weather a recession in the euro region and grow 0.3 percent this year.

“German consumers are defying Europe’s recession trends,” GfK said in a statement. “To ensure consumer spending can support the economy” it is “vital that decision makers do everything needed to re-establish trust,” it said.

GfK’s gauge of economic optimism surged to 7.5 in January from minus 0.9 in December, and an index of income expectations increased to 34.1 from 34. A measure of consumers’ willingness to spend rose to 41.8 from 27.4.

Germany’s statistics office said on Jan. 11 that the economy probably shrank about 0.25 percent in the fourth quarter. Growth slowed to 3 percent in 2011 from 3.7 percent in 2010, which was the most since German reunification two decades ago.

Confidence in Sweden

Sweden, which isn’t one of the 17 countries sharing the euro, is also seeing sentiment improve. Consumer confidence rose to minus 1.3 in January from minus 7.4 in December, the National Institute for Economic Research said today.

Europe’s debt crisis is nevertheless curbing global growth. Fed Chairman Ben S. Bernanke yesterday laid the groundwork for a third round of large-scale asset purchases should unemployment remain higher than policy makers would like.

The U.K. yesterday reported a 0.2 percent economic contraction in the final quarter of 2011, and a report today from the Confederation of British Industry showed retail sales fell in January at the fastest pace in almost three years.

In Asia, South Korea’s economy grew 0.4 percent in the fourth quarter from the third, the least in two years, the central bank is Seoul said earlier today.

In France, Europe’s No. 2 economy, consumer confidence remains near a record low of 79 last matched in October 2008.

‘Dangerously Close’

While today’s increase in consumer sentiment to 81 lifted the index from its lowest since March 2009, it is “still dangerously close to the all-time low,” said Dominique Barbet, an economist at BNP Paribas in Paris. “The headline decline has been interrupted but the stabilization at such a low level is unfavorable for the consumption outlook and growth.”

French jobless claims soared to the highest in 12 years in December as companies such as Peugeot Citroen SA trimmed payrolls. The number of people actively looking for work at the end of December rose by 29,700, or 1 percent, to 2,874,500, the Labor Ministry said today in an e-mailed statement.

Italy’s situation is similar. Consumer confidence in the third-largest euro economy held at a 16-year low in January as Europe’s debt crisis forced austerity measures that may help push the economy into a recession.

The Italian confidence index remained at 91.6, matching the previous month, which was the lowest since January 1996, national statistics office Istat said in Rome today.

--Editors: Matthew Brockett, Craig Stirling

To contact the reporters on this story: Mark Deen in Paris at markdeen@bloomberg.net; Gabi Thesing in London at gthesing@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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