German consumer sentiment is likely to decline going into January as worries over unemployment weigh on households' readiness to spend, data showed today.
The consumer sentiment indicator from GfK market research group, based on a survey of 2,000 Germans, fell to 3.3 for January from a revised 3.6 in December. December's reading had been initially reported as 3.7.
The forward-looking indicator signalled a weak start for 2010, registering its third consecutive monthly drop and standing below both its four-year average of 4.9 and a forecast of 3.5 made by economists.
"Spending will probably not be strong enough to lead to a year-on-year turnaround," said Simon Junker from Commerzbank. "For the full year, rather, we'll likely see a sideways movement or stagnation."
German private consumption slumped in the third quarter after driving growth in the April-June period on the back of a government cash-for-clunkers scheme that is now exhausted.
Economists now expect weakening household spending to weigh on growth in Europe's largest economy, despite the passing of a first major package of tax cuts by Chancellor Angela Merkel's new coalition last week.
"The growth acceleration law and the tax cuts linked to it have hardly made an impact on income expectations," said Dekabank's Sebastian Wanke. "Worries about future unemployment are proving a counterweight that is at least equally as strong."
The dim outlook has also been echoed by leading German retailers like Metro, which has warned that fourth-quarter trading will be as tough as the third quarter.
Unemployment is expected to rise in the coming months and incomes are under pressure, with hundreds of thousands of Germans shifted to part-time work under the government's "Kurzarbeit" scheme to prevent mass layoffs.
"It's a sobering time for consumers. The car-scrap scheme has run out and the government is more or less in a straightjacket from indebtedness following the crisis. On top of this the growth outlook for the coming year is austere," said Mr Wanke.
Still, a positive signal for a December boost to consumer spending came from the HDE retailers' association on Sunday. Christmas shopping, the group said, had been lifted by last-minute purchases.
Reuters