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Consumer Affairs

German consumer confidence gets a dent

The geopolitical situation is starting to weigh on German consumer confidence. For the first time in one and a half years, the closely watched GfK consumer confidence index fell in August.

The geopolitical storm clouds are beginning to darken German consumer confidence. For the first time since last year the closely watched GfK consumer confidence index fell in August, from 8.9 to 8.6. It was also the strongest fall since May 2011. Expectations fell their sharpest since the index began in 1980.

The drop in confidence is the first sign that German consumers are starting to worry about the potential economic fallout of the Ukraine crisis and the Middle East conflict. GfK said consumer worries about the economic outlook had risen tangibly. Income expectations also fell back from their July record, but only slightly. GfK said stable jobs and low inflation were still giving rise to hopes that any economic fallout from geopolitical tensions would be relatively short-lived.

Europe's consumer divide widens

Analysts remain unperturbed

BayernLB analyst Stefan Kipar says that although consumers are becoming more nervous, that has so far not impacted household spending. "Fundamental factors such as the robust labor market and spending power growth after above-inflation wage increases continue to dominate."

Berenberg Bank's Christian Schulz also expects spending to continue, as long as the Ukraine crisis doesn't start to affect the labor market here.

GfK outlook still positive

Spending on big-ticket items such as cars and furniture remains high. However, two other measures of insecurity rose in August. Germany's currently record-low savings ratio climbed in August, as nervous consumers began to plan for rainy days. And the Ifo business climate index fell to a 13-month low.

But although confidence is a little shaken, the overall outlook remains positive - GfK expects consumer spending in Germany to grow by 1.5 percent this year.

bw/hg (dpa, Reuters, AFP)

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