German consumer confidence is predicted to weaken in September, reversing August’s improvement and reflecting worsening income expectations and souring prospects for the country’s economy.

Results by market research firm GfK on Tuesday showed that their forward-looking consumer confidence index dropped 0.9 points to -25.5 in September, after a very small increase was registered in August versus July.

Europe’s largest economy is struggling, suffering from a deepening downturn in manufacturing output, with data last week showing that the industrial giant recorded no growth in the second quarter. “The chances that consumer sentiment can sustainably recover before the end of this year are dwindling more and more,” Rolf Burkl, a consumer expert at GfK, said.

Meanwhile, in a much-awaited speech at the Federal Reserve’s annual economic policy summit in Jackson Hole, Fed Chair Jerome Powell called for more vigilance in the fight against inflation, warning that there could be more interest rate hikes.

While Powell reaffirmed the Fed’s inflation target of two per cent, he called it “challenging” to know when monetary policy is restrictive enough to “know in real time when such a stance has been achieved”. Powell’s message essentially was that the status quo is not good enough. The Fed is likely to raise interest rates unless the economic growth falters and the tight labour market weakens considerably. “Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Powell said.

Finally, in Japan, the unemployment rate increased for the first time in four months in July, while an indicator of labour demand weakened slightly.

The seasonally adjusted unemployment rate increased to 2.7 per cent in July compared to June, higher than forecasts of 2.5 per cent and June’s 2.5 per cent. Separate data that gauges the outlook for labour market demand showed that the job-offers-to-applicants ratio worsened for the sixth time this year, and imply that there were 129 jobs available for every 100 applicants.

“Looking at a leading indicator, the number of job openings in the manufacturing sector has been in a downward trend recently,” Kota Suzuki, an economist at Daiwa Securities said. “This is likely due to the impact of declining overseas demand.”

 

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