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Germany's Consumer Confidence 'Lackluster'

German consumer confidence remained unchanged at 2.5 points, as low inflation and energy prices combine with tentative hopes that an economic turnaround may be in sight.

BERLIN (AP) -- German consumer confidence remains steady, though lackluster, as low inflation and energy prices combine with tentative hopes that an economic turnaround may be in sight, according to a survey released Monday.

The GfK research group said its forward-looking consumer climate index for May stands at 2.5 points -- unchanged from April and March. The April figure was revised upward from an initial estimate of 2.4.

Although the indicator remains very low, the economic crisis has had remarkably little effect on consumer confidence in recent months.

Still, looking ahead, GfK warned that leading German economists' prediction last week that the economy will shrink by 6 percent this year "are likely to severely test consumer sentiment."

"The greatest hazard jeopardizing further development of the consumer climate comes from the job market," it said in a statement.

The export-driven German economy -- Europe's biggest -- went into recession in last year's third quarter. But while unemployment is rising, it has yet to spike upward dramatically.

Last week, a closely watched business confidence index rose amid expectations that the economy could turn the corner later this year.

GfK said Germans' economic outlook and income expectations had been fueled by "factors which increase purchasing power, such as low inflation, lower energy prices and higher pensions, along with some isolated signs signaling a trend reversal by the end of the year."

"To date, the propensity to buy has virtually maintained a constant good level which is above average," it said. In April, an index measuring consumers' propensity to buy dipped by 1.5 points on the month to 12.4, but was still well above the level of a year earlier.

GfK said that an index measuring consumers' income expectations rose by 3.4 points in April to minus 8 and that, while they remain "very pessimistic," an index measuring economic expectations was up 1.6 to minus 31.2.

Alexander Koch, an economist with UniCredit in Munich, noted that a slight upward trend in consumer confidence has now stalled -- even amid the first effects of a government stimulus program, such as a popular car-scrapping bonus for new car buyers.

"A steep rise in unemployment lies ahead of us," he said in a research note. After this year's first quarter, a drop in car sales and the generally "tarnished propensity to buy, driven by the labor market developments, should bring back weakness in private spending," he said.

The GfK survey is based on interviews of about 2,000 consumers.

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