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German Consumer Confidence Dwindles Further – Any Bottom in Sight?

Last updated 3/26/2009 3:39 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

The GFK German Consumer confidence indicator declined in April to 2.4 from 2.6 the month prior slightly below market expectations of 2.4. Although off the lows set in market panic of September  of last year, the confidence gauge remains mired near the bottom of its range as consumers in Eurozone’s largest economy continue to be plagued by rising unemployment and worry  over economic growth going forward.

The German Union IF Metal expressed concerns that problems in the auto sector will lead to further layoffs this summer as the industry struggles with waning global demand. Fully 70% of German auto production is destined for the export market. Up to now German auto manufacturers have been able  to maintain payrolls through productivity improvements. However should demand decline further, layoffs will be inevitable leading to further deterioration in consumer confidence readings.

For now German confidence gauges, much like the rest of the economic releases  from the  country including the latest PMI reports and IFO survey all point to some stabilization albeit at very low levels. The question going forward is whether this batch of data represents a sustainable bottom and a possible base for recovery or simply a pause before the economic news becomes much worse.

The currency market remain cautious with EUR/USD capped for now at the 1.3700 level precisely because of the concerns about weakening economic growth in H2 of 2009. As we’ve noted many times before, the fear in the currency market  is that Eurozone fiscal and monetary officials have been  too passive providing too little stimulus to counteract the forces of economic contraction. If EZ economic data begins to deteriorate once again, those concerns will come true and the unit could unwind some of its recent gains.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.