German Consumer Sentiment Drops

FRANKFURT—German market research group GfK's forward-looking consumer climate index for January declined from the previous month, reflecting expectations of slower growth, GfK said in a statement Tuesday.

However, the research group said consumers still expect the German economy, Europe's largest, to remain on an upward trend.

The January index came in at 5.4 points, down from 5.5 in December. Economists surveyed forecast a rise to 5.7 points. "Although the economic expectations at year-end show some losses, consumers continue to see the German economy clearly on a growth path," GfK said in a statement.

GfK's overall consumer index refers to the next month but its subindexes—economic expectations, income expectations and buying propensity—refer to the current month. In December all three subindexes fell.

The economic expectations index fell to 58.8 points in December from 65.8 points in November, reversing a rise of six consecutive months. "This level signals that consumers continue to see the German economy clearly recovering," GfK said.

GfK said the pronounced optimism about the economy is well founded, as it has also been reflected by the current increase in the Ifo business climate index. The Ifo index hit a record high of 109.9 in December, the highest level since Germany's reunification.

GfK also said employment is expected to continue to rise in 2011, and the number of unemployed will be below three million people on average. The shorter-hours work regime, introduced during the economic crisis, will practically disappear, GfK said, adding that in summer 2009, about 1.5 million people worked shorter hours.

Income expectations fell to 40.3 points in December from 44.9 points in November, while the buying propensity declined to 33.8 points from 39.3 points.

"Employees hope that the good economic situation means that there will be more room to maneuver for higher wages in coming wage negotiations," GfK said. It added that several companies have announced plans to bring forward by two months wage increases originally planned for April, or give employees a one-off payment.

The buying-propensity index declined after what GfK called an "unusually strong" increase in November. In November, buying propensity surged to 39.3 points from 22.5 points.

The decline in buying propensity is due to the slightly higher price expectations and the lower income expectations, GfK said, adding that petrol and heating oil price rises have raised inflationary fears.

market research group, climate index, wage negotiations, level signals, german economy, economic expectations, income expectations, expectations index, consumer index, business climate, gfk, growth path, german market, economic crisis, economic situation, upward trend, propensity, reunification, ifo index, optimism
qtdz
Online.wsj.com