Unemployment fears worry Germans

Rising unemployment has hit shoppers' confidence

German consumer confidence remains weak amid production cutbacks and fears of unemployment, a survey indicates.

The GfK research institute said its forward-looking consumer climate index for January stood at 2.1 points - the same as December's revised figure.

Falling inflation had helped consumer sentiment resist the worsening economic situation until now, said the report.

But shoppers are turning gloomier as the downturn in Europe's biggest economy continues.

"Reduced production, cuts in working hours and announcements of potential redundancies are increasingly leading to consumers feeling themselves to be personally affected by the crisis," GfK said in a statement.

Until recently, Germany had been able to depend on its traditionally strong export sector to offset any downturn in domestic demand.

However, exporters have been hard hit by falling demand worldwide, which has left businesses now more dependent upon Germany's own consumers for sales.

Germany's economy ministry has recently become more pessimistic in its forecasts. Last week a senior official said the German economy could contract by up to 3% in 2009.

Consumer gloom

There were signs in these latest figures from GfK that consumers were becoming more pessimistic.

The part of the index which measures Germans' income expectations dropped markedly after four consecutive increases - to minus 15.4.

While another section, which measures consumers' propensity to buy, did rise slightly to minus 6.3 - although this is well below its long-time average of zero.

Some economists had feared that consumers would react to the recession in Germany by cutting back sharply on their Christmas shopping.

"All in all, retailers are satisfied with Christmas sales after the fourth advent weekend," said Alexander Koch, at UniCredit in Munich.

GfK's monthly survey is based on interviews with some 2,000 consumers.