BERLIN (AP) -- Consumer confidence in Europe's largest economy rose slightly, halting a four-month slide, bolstered by falling oil prices and receding fears of inflation, a survey conducted before the meltdown on Wall Street earlier this month has found.
The forward-looking GfK consumer climate forecast index, released Thursday, rose to 1.8 points for October from a revised 1.6 points in September. That's a small but encouraging gain after a confidence was forecast to hit a five-year low this month, the report concluded.
"In spite of growing fears of a recession and the marked economic stagnation emerging in Germany, consumers are currently a little more confident about their situation," the report stated.
The survey was conducted before the bankruptcy of Lehman Brothers Holding Inc. and the $85 billion bailout of insurer AIG. That, along with uncertainty among other Wall Street titans, has caused markets to oscillate wildly and resulted in a proposed $700 billion bailout by the U.S. government in a bid to restore some order to markets.
The GfK group also revised downward its estimate on consumption growth in the Germany economy for 2008, from half a percent to flat compared to last year.
Alexander Koch, an economist at UniCredit in Munich, said the modest rise in confidence was likely due to lower oil prices and rising wage demands, and noted that the economy still faces major challenges.
"Despite the modest rebound, a bundle of burdening factors continues to keep the mood of private households at a depressed level," Koch said.
He said a drop in retail sales of key items like cars pointed to continued contraction on consumer consumption.
"Germany is in the midst of a consumer recession again. And the continuously low level of consumer climate doesn't argue for a recovery in the third quarter either," Koch said.
In the report, the Nuremberg-based GfK said that consumers' propensity to buy made the healthiest recovery, a 15.1 point increase to minus 12.8 points in September after a three-year low in August.
"In the hope of more moderate inflationary development, consumers are clearly once again overcoming their reticence to buy, at least in part," said the report. "More stable prices could help lift the propensity to buy out of the doldrums."
The index that measures economic expectations made a solid increase to minus 15.7 points in September from minus 21.8 points in August. The index showing income expectations also improved slightly to minus 14.1 points in September from minus 16.8 points in August.
