Consumer uncertainty

German consumer confidence dropped leading in to April on the back of rising inflation, according to a much-watched monthly index released by the Society for Consumer Research (GfK) on Tuesday.

Figures fell by 0.1 percent to 5.9 points marking the first drop in 10 months.

"This marks an end to the upward trend in consumer confidence," the GfK said in a statement. The reasons behind the fall were "more uncertain international conditions."

It was believed the global rise in oil prices and unrest in North Africa may have contributed to the April figures. The nuclear crisis in Japan, however, did not have an impact as the survey had already been completed prior to destabilization at the Fukushima nuclear plant.

The GfK said consumers in Europe's biggest economy were also worried about increased expenses on everyday goods as a result of rising energy and commodity prices. The inflation rate in Germany recently rose to 2.1 percent, the highest level in nearly two and a half years.

Meanwhile, the barometer of income expectations fell - from 42.9 to 40.5 - notwithstanding decent labor market and wage conditions. "This stabilizes the purchasing power of many households and was expected to have considerably reduced the extent of the negative effects of fears of an increase in inflation," GfK said.

The Nuremberg researchers compile the consumer sentiment index based on how average Germans felt about the economy, their personal finances and whether they planned any major purchases in the near future.

Author: Darren Mara (Reuters, AFP)
Editor: Rob Turner