FRANKFURT, Germany (AFP) – The eurozone debt crisis and higher energy prices have sapped German consumer sentiment, resulting in a third consecutive drop in the GfK index, the research institute said on Wednesday.
On the basis of a survey of 2,000 individuals done this month, the forecast index for June dropped to 5.5 points from 5.7 points in the reading for May.
A deterioration of the Greek debt crisis and persistently high energy prices have cooled optimism among consumers in Europe's biggest economy, a GfK statement said.
Boosts from falling unemployment and solid economic growth have drifted to the background for now in the view of those surveyed, it added.
A breakdown of the results showed that shopper's propensity to make large purchases had declined and that dogged inflation had raised fears related to personal revenues.
Consumers were still relatively upbeat with respect to the country's economic prospects however, though that indicator declined slightly as well.
Economy Minister Philipp Roesler estimated Tuesday that business activity would expand by "at least" 2.6 percent this year.
The GfK poll stood in contrast to one published Tuesday by the Ifo research institute, which found business leaders generally upbeat about the situation at present, particularly in the retail sector.
And data released by the national statistics office showed that consumption gained 0.4 percent in the first quarter from the previous three-month period.
That was in large part the result of falling unemployment.
But Andreas Rees, chief German economist at the Italian bank UniCredit, said: "Despite substantial tailwind via job creation, we do not think that the German consumer will completely take off this time."
Wages have not risen substantially while eurozone inflation of 2.8 percent has cut purchasing power, and an ageing German population is putting money aside amid fears that retirement pensions will not suffice, he explained.
(Reuters) – Federal prosecutors are investigating allegations that former employees of Avon Products Inc (AVP.N) bribed foreign officials, the Wall Street Journal reported, citing people familiar with the matter.
Prosecutors in the southern district of New York's complex frauds unit in Manhattan and the Justice Department's fraud section in Washington are seeking more information on whether Avon employees had possibly violated the foreign corrupt practices act, the Journal reported.
The door-to-door beauty company has been conducting a three-year internal probe into bribery allegations that began in China and then extended to Latin America.
The company's internal bribery investigation recently found that millions of dollars of questionable payments had been made to officials in Brazil, Mexico, Argentina, India and Japan, the paper earlier reported.
No charges have been filed against any individuals or the company and Avon is continuing with its own internal investigation, the paper added.
The household products maker has already come under fire for spending as much as $96 million in 2010 on its bribery investigation and after it announced its plans to spend a similar amount this year.
Avon, DoJ and the SEC were not available for comment outside of normal U.S. business hours.
(Reporting by Rachel Chitra in Bangalore; Editing by David Cowell)
TOKYO (Reuters) – Japan's economy was already showing signs of recovering from the slump that immediately followed the devastating March 11 earthquake, Bank of Japan Governor Masaaki Shirakawa said on Wednesday.
But Shirakawa repeated that the central bank would focus on risks to the economy for the time being, signaling its readiness to loosen monetary policy further if the damage from the quake proves bigger than expected.
The BOJ will also examine at its next meeting in June what more it can do to support quake reconstruction and how it may be linked to efforts to boost Japan's potential growth, he said.
Some companies are bringing forward targets for restoring supplies and production and consumers seem less reluctant to spend than immediately after the quake, Shirakawa told a seminar.
"It might not be a V-shaped recovery but there is a good chance we will feel a stronger sense of a recovery in the latter half of the current business year," he said.
But he warned that the outlook remained uncertain, adding that if the slump in manufacturing activity persists, it may dent household spending and capital expenditure.
The BOJ loosened monetary policy just days after the 9.0 magnitude earthquake and a deadly tsunami lashed Japan's northeast by doubling to 10 trillion yen ($122 billion) a pool of funds dedicated to buying assets ranging from government bonds to private debt.
It has stood pat on policy since then, on the view that the easing was sufficient to shore up sentiment and the economy will resume a moderate recovery around the autumn, once supply constraints weighing on factory output ease.
Some lawmakers have called on the BOJ to underwrite government bonds, or increase its buying of bonds from the market, to keep yields low as the government mulls big spending for quake reconstruction.
Shirakawa reiterated his opposition to such calls, saying that doing so would destabilize markets by hurting confidence in Japan's fiscal discipline.
"There is no magic wand that can create something from zero," he said, warning that there was no easy fix to the challenge of balancing the need for supporting the economy and reining in Japan's huge public debt.
With interest rates stuck at zero and little effective means to bolster the economy through monetary policy, some in the BOJ wants to focus more on offering direct financial support to quake reconstruction.
Minutes of the April 28 meeting released on Wednesday showed that many BOJ policymakers were eager to consider a new move to support quake reconstruction.
Some of the members said that, in doing so, there may be room to make use of the BOJ's loan scheme aimed at encouraging banks to lend more to industries with growth potential, the minutes showed.
Sources familiar with the bank's thinking have said the board may discuss expanding the loan scheme for growth industries, put in place last year, as early as June, as total lending is nearing the 3 trillion yen ($36 billion) limit.
Shirakawa said there was room to make use of the scheme to help quake-hit firms, but that it would be discussed at the next policy review in June.
($1 = 81.920 Japanese Yen)
(Editing by Tomasz Janowski)