According to the latest information out of the GfK AG's, German consumer confidence is very low, at a two year low. Inflation is a key problem here for the consumer as this has reduced the amount of spending power that households have.
German inflation rose throughout 2007 at a very fast pace not seen since harmonized euro region records were first taken in 1996. Among the reasons behind inflation include rising energy costs and higher sales taxes. The jobless rate here fell to 8.4 per cent through the end of last year, which signifies the lowest numbers since 1993.
While that is a negative effect on the economy, many believe that the German economy will fair just fine even with a US slowdown. This is due in part to the growing business confidence here.
Still some negative effects are seen. Announced earlier this week was that GMAC Financial Services freezing its property financing business in Germany. This move is temporary but is being blamed on the debt market turmoil faced here. Other lenders including Hypo Real Estate Holding AG are also worried about investments here. They will significantly decline new business due in part to the losses faced due to the US Subprime mortgage crash.
