Wednesday 28 August 2019 10:33 am

German consumers remain upbeat as country slides towards recession

BERLIN, GERMANY – MAY 18: Visitors purchase food at the ‘Thai Park’ on May 18, 2019 in Berlin, Germany. Preussenpark, in the Wilmersdorf district of Berlin, is known to many as the ‘Thai Park’ on sunny days and especially weekends, when it fills with Thai women selling their country’s traditional food to the city’s Thai community, other Berliners, and tourists. Although the market has been tolerated by local hygiene and tax offices, due to its popularity, increased over the 20 years of its existence, a debate has grown stronger between those authorities and the visitors who appreciate the Thai street food and relaxed atmosphere, seen by many as an exotic oasis in a bourgeois part of the city. While the district government claims it does not want to shut down the event despite pressure from some locals to do so, it wants to find a solution that meets official business and food standards as well, which, it claims, the festive food market is currently lacking. (Photo by Adam Berry/Getty Images)

German consumers remained surprisingly positive in August despite warnings that the shrinking economy that could be heading into a recession, a survey has shown today.

The consumer sentiment indicator from researcher GfK held steady at 9.7 in August, the same as in July, suggesting that the German public will continue to support the stalling economy as unemployment stays low.

Yet there were signs of Germany’s economic woes weighing on consumers, with the economic expectation indicator losing 8.3 points and falling to minus 12. This was its lowest level since 2013, when Europe was in financial crisis.

A separate survey from think tank Ifo showed that employers posted fewer job openings in August. Ifo’s employment barometer fell to 98.1 points in August from 99.5 in July.

The mixed survey data came a day after official figures confirmed the German economy shrank by 0.1 per cent in the second quarter, dragged down by the biggest fall in exports in six years.

A rise in consumer spending was not enough to offset the damage done by falling trade volumes. The economy has struggled under the weight of trade tensions and Brexit uncertainty.

While consumers remain upbeat, hints that their outlook is subdued and that employers are reducing hiring could spell further trouble for the country’s economy.

The Ifo institute noted that in the services sector hiring intentions took a serious slide. “The last time a drop of similar intensity was recorded was December 2007,” the institute said.

“Service providers are gradually forfeiting their role as employment drivers, as the recession in manufacturing has now finally spread to their sector.”

Rolf Burkl of GfK said: “Trade conflicts with the United States and the threat of tariffs for German exports as well as ongoing Brexit negotiations and the prospect of a no-deal Brexit mean that consumers are seeing an increased risk of recession in Germany.”

Yet the economic news is not holding back consumer spending, GfK said. “After its significant losses of the previous month, the propensity to buy has once again recovered in August.”