THE TAKEAWAY: German GfK predicts weakening consumer confidence -> energy costs, inflation seen weighing on purchasing power -> Euro weakens against US Dollar
German consumer confidence will diminish in May as rising energy costs weaken household purchasing power, the German GfK institute said today. The May GfK consumer confidence index is set to drop to 5.6% from a revised 5.8% in April. Markets had expected a May reading of 5.9%, based on the median forecast by a team of economists.
Rising energy prices were seen weighing on households’ spending power as inflation creeps up on Europe threatening to torpedo economic recovery. Inflation fears have seeped to the surface in Germany as property prices rise and monetary policy remains loose. Rising inflation in Germany could have widespread implications for the rest of the Eurozone given Germany’s size and influence in the 17-nation bloc.
The Euro weakened somewhat versus the US Dollar following today’s GfK release. As of this report the single currency was trading back down towards multiday consolidation levels in the 1.3100 area.
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