Denmark’s consumer confidence on Monday fell to a near 18-year low on the back of inflation worries, a slumping housing market and a gloomy global economic outlook.

Denmark became the first European Union country technically in recession this year when it announced last month a second consecutive quarter of negative growth.

“Today’s numbers sends another strong warning that private consumption will be hit harder than many have previously feared and that is even before we can see a downturn in employment, which we believe is imminent,” Handelsbanken economist Rasmus Gudum-Sessingso said.

While growth has slowed and housing prices have fallen, economists say Denmark still, however, faces a shortage of labour, which may push wages and inflation higher into next year.

Data from the national statistics office showed the overall consumer confidence index fell to minus 12.2 in August from minus 9.7 in July, its lowest level since 1990.

In a Reuters poll, analysts had forecast a reading of minus 8.0.

The drop in consumer confidence surprised economists, who expected a positive impact from the drop in oil prices and a stop in interest rate hikes from the European Central Bank.

“The conclusion is that Danes these days are starting to be more cautious when it comes to the economic development,” said Nordea Chief Economist Helge Pedersen.

Pedersen said the continued slump in housing prices was to blame for consumers’ gloom but that continued media coverage of the financial crisis could also be partly responsible.

“In any event, this doesn’t look good for the development in private consumption,” he said.

Source: http://www.afxnews.com

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