Inflation Knocks Wind out of Consumers in US and Germany

26 June 2008

NEW YORK: Fears for the future of jobs, the economy and the housing market, coupled with the effects of fuel and gasoline price hikes, have plunged US consumer expectations for the next six months to an all-time low.

The Conference Board business researcher says its monthly index of consumer confidence has continued to slide and hit 50.4 points in June from 58.1 points in May.

The Board, which polls 5,000 consumers each month, says the present situation index that measures how consumers feel about current conditions fell to 64.5 from 74.2 in May.

The expectations index, which measures consumers' outlook for the next six months, fell to 41.0 from 47.3 in May.

Comments research director Lynn Franco: "Consumers' assessment of present-day conditions continues to grow more negative and suggests the economy remains stuck in low gear.

"Looking ahead, consumers' economic outlook is so bleak that the expectations index has reached a new all-time low. Perhaps the silver lining to this otherwise dismal report is that consumer confidence may be nearing a bottom."

Meantime, consumers in Europe's biggest economy, Germany, are also succumbing to the global slowdown. Confidence slipped to a 30-month low in June, according to market researcher GfK.

The company said: "Rising fears of inflation, combined with the sustained crisis in the financial markets, a strong euro and a weaker global economy mean that consumers are not very upbeat in their assessments of future economic growth."

GfK also found wage increases have made little difference to consumer sentiment, because they were partly offset by inflation.

German inflation, however, is expected to remain at around 3.0% in coming months, lower than the record 3.7% for the whole eurozone.

Data sourced from BBC Online and; additional content by WARC staff