German consumer confidence dropped to the lowest in more than two years as soaring energy prices sapped people's purchasing power.
GfK AG's index for July, based on a survey of about 2,000 people, declined to 3.9 from a revised 4.7 in June, the Nuremberg- based market-research company said in a statement today.
Oil prices doubled over the past year, clouding the outlook for economic growth and driving up consumer prices.
Inflation, based on a harmonized European Union method, accelerated to 3.1 per cent last month and is likely to quicken again in June, according to a separate survey of economists.
"The biggest problem for consumers is high inflation, the price increases for energy and food," GfK Chief Executive Officer Klaus Wuebbenhorst said in a Bloomberg Television interview.
"People buy food every day. Price rises for food therefore add to perceived inflation.'' Due to "stiffening inflation expectations," GfK cut its forecast for German consumer spending growth this year to 0.5 per cent from 1 per cent.
Expectations, as measured by the so-called breakeven rates on five-year French inflation-indexed bonds, were at 2.5 per cent yesterday, up from 2.12 per cent in March.
Oil prices reached a record $139.89 a barrel last week and traded at $136.88 a barrel today. Increased demand for food in fast-growing emerging markets has also pushed up global food prices, the European Central Bank said on June 12th.
Bloomberg