German Consumer Confidence Falls for First Time in 14 Months

t an increase to 4.5 from an initially reported 4.3, the median of 13 estimates in a Bloomberg News survey showed. Crude-oil prices rose to the highest in a year this month, threatening spending power at the same time as unemployment increases . While German business confidence rose to the highest in more than a year in October and manufacturing expanded, the expiry of government stimulus measures and a strengthening euro may curb the pace of the recovery next year. “Despite the slight setback, private consumption remains a major source of support for the German economy this year, since investments and exports will record large decreases at the close of 2009,” GfK said in the report. “It remains to be seen whether private consumption can also fulfill this supportive function in the coming year.” Spending GfK’s measure of economic expectations increased to 8.7 from 3.4 in the previous month. An index of income expectations fell to 12.9 from 16 and a gauge of consumers’ propensity to spend dropped to 26.1 from 36.5. “The propensity to buy has also decreased in the wake of falling income expectations,” GfK said. “One reason for this is certainly the discontinuation of the scrappage bonus at the end of September,” it said, referring to a government incentive to buy new cars. Revenue at Volkswagen AG’s Audi luxury cars division will probably fall less than expected this year, and its German sales will return to “light growth” in 2010, Audi’s sales chief Peter Schwarzenbauer said last week. The stimulus to consumption from low inflation will also “lose its positive impact” in the near future, GfK said. Oil has risen 80 percent this year to around $80 a barrel and consumer price expectations have reached a “turning point.” Chancellor Angela Merkel’s government has spent 85 billion euros ($128 billion) on measures to energize the economy. Her Christian Democrats are also prepared to cut taxes by 20 billion euros after they form a coalition government with the Liberal Democrats, negotiator Steffen Kampeter said on Oct. 16. The Economy Ministry raised its outlook for the economy on Oct. 16, forecasting growth of about 1.2 percent in 2010 after a 5 percent contraction this year. In April, it predicted a 0.5 percent drop in gross domestic product in 2010. To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net Last Updated: October 26, 2009 03:00 EDT