Germany's consumer confidence index dropped to 4 points in October, down 0.2 points from the previous month.

The Nuremberg-based GfK economic research institute said a drop in a sub-index measuring consumers' readiness to make large purchases was largely responsible for the fall and reflected concerns that higher oil and energy prices would eat into disposable income.

Fears of rising unemployment are also strong, despite the fact that much-feared mass layoffs have failed to materialize so far. Some major German economic institutes have even revised their April unemployment forecasts for 2010, lowering the number of jobless from 5 million to 4.1 million. Around 3.3 million people are currently without a job in Europe's biggest economy.

Another factor blamed for the slight drop in consumer confidence is the end of Germany's cash-for-clunker's scheme, which paid 2,500 euros ($3,750) to drivers who scrapped their old cars and bought new ones.

Worries not shared by German business

While the mood among consumers has dimmed, business leaders seem even more optimistic than they were before the country's parliamentary elections.

On Friday, a key survey by the Ifo research institute showed that German business confidence had reached its highest level in more than a year.

One reason for the surge is the Federal Labor Office 's decision to ease regulations that allow companies to hire workers and place them on state-subsidized reduced working hours so qualified workers are available once the economy picks up again.

jg/afp/dpa
Editor: Sam Edmonds