German consumer confidence is rising, helped by an increase in income expectations and a stable job market amid the recession, a survey showed Tuesday. But despite the improvements, research groups continued to slash their growth forecasts, suggesting the downturn is far from over.
The GfK research group said its forward-looking consumer climate index for July stood at 2.9 points, up from a revised 2.6 points in June. The Nuremberg-based agency noted that consumer sentiment remains at a low level overall, but said the recent uptick, following a period of stagnation, was encouraging.
``Following the recent growing number of signs that the economic downturn may be at an end, consumer hopes of economic stabilisation are intensifying and, accordingly, economic expectations are increasing moderately,' GfK said in a statement. Despite the mild improvements, two leading German research groups cut their economic growth forecasts further for 2009 and 2010.
The Munich-based Ifo Institute lowered its April prediction of a 6 percent drop in 2009 German GDP to 6.3 percent. It also said it was now predicting a 0.3 percent drop in 2010. ``After a temporary increase in summer primarily driven by fiscal stimulus, the basic tendency of economic output will be further contraction,' Ifo said in a statement.
The RWI research group also revised its prediction downward again, saying it now expects a 6.4 percent GDP drop this year _ even worse than the Bundesbank's prediction. It said, however, that the drop should taper off, and that by the end of next year ``a light GDP increase of 0.2 percent is possible.' Germany, Europe's biggest economy, went into recession last year as the global crisis sapped demand for its exports.
The country's central bank predicted this month that the economy will shrink by 6.2 percent this year and stagnate in 2010. GfK said reports that year-on-year inflation sank to zero in May and that employment remained ``fairly robust' helped boost consumers' income expectations and their propensity to buy.
Germany's jobless rate dropped slightly to 8.2 percent in May, thanks to a regular spring boost. However, the government has predicted that the number of Germans out of work will average some 3.7 million this year - an increase of some 450,000 from 2008 - before rising more sharply next year to 4.6 million.