Confidence among German consumers has declined as labor market problems begin to affect the population.

According to the consumer climate index published by the market research group GfK, confidence in Europe's largest economy has fallen by 0.2 percentage points this month to 3.2 points.

Based on a survey of more than 2,000 Germans, the index reflects the country's economic contraction of five per cent in 2009, which is the worst fall in gross domestic product recorded in 60 years.

Carsten Brzeski, economist at ING Financial Markets, told the BBC that this decline in optimism will affect consumption levels throughout 2010.

He said: "Looking ahead, a spending spree seems rather unlikely given Germans' inclination to save."

Germany's unemployment data for January is due to be released on Thursday (January 28th) and Wall Street Journal analysts have predicted that the number of people out of work will rise by 20,000 to just less than 3.5 million.

This figure is equivalent to 8.32 per cent of the available labor market.