US Consumers Crestfallen, German Businessmen Bullish

27 October 2005

Hurricane-battered US consumers are feeling gloomy about future economic prospects. The latest survey by the Conference Board research group shows consumer confidence down to its lowest level in two years.

The devastating storms and the resulting hikes in gasoline prices pushed the monthly index figure down to 85.0 in October, from September's upwardly revised 87.5.

In addition, a survey by property dealers, the National Association of Realtors, shows sales of previously owned homes were unchanged in September, and would have registered a fall were it not for demand among the hurricane homeless.

  • In Europe, however, the picture is brighter. Business confidence in Germany - long in the doldrums - is on the increase, boosting hopes of a sustained recovery in the continent's biggest economy.

    Munich-based Ifo Institute, a leading economic researchers, says business sentiment surged unexpectedly to a five-year high in October, amid signs of a revival in domestic demand and an easing of the euro and oil prices.

    All surveyed sectors - manufacturing, retailing, wholesaling and construction - brightened in October, with retailing posting the most impressive improvement.

    The Ifo index rose to 98.7 from 96.0, powered by a sharp improvement in firms' assessment both of current conditions and expectations for the next six months, well above economists' forecasts.

    Says Ifo director of analysis Gernot Nerb: "I think we can say we have turned the corner. Investments are picking up, and consumers are starting to spend money."

    But, warns Jörg Krämer, chief economist of HVB bank in Munich: "I expect that after this quite good second half, Germany will sink back to anaemic growth next year."

    Data sourced from Wall Street Journal Online; additional content by WARC staff