German consumer confidence hits four-year high

29th March 2006, Comments 0 comments

29 March 2006, BERLIN - German consumer sentiment is to climb to its highest level in more than four years in April, a survey released Wednesday showed, as signs emerge that shoppers in Europe's biggest economy are starting to open up their wallets and spend again.

29 March 2006

BERLIN - German consumer sentiment is to climb to its highest level in more than four years in April, a survey released Wednesday showed, as signs emerge that shoppers in Europe's biggest economy are starting to open up their wallets and spend again.

Drawn up by the Nuremberg-based GfK market research institute, the forward-looking consumer sentiment index rose to 5.1 from a revised March reading of five.

"Overall, sentiment among consumers remains stable," GfK said in releasing its latest survey.

"While Germans are a bit less optimistic about the business cycle and muted about their personal finances, their willingness to undertake larger purchases has risen once again," the GfK said.

Based on a survey of about 2,000 Germans, the GfK report came in the wake of the release Tuesday of another key German indicator which showed business confidence in the nation hitting a 15 year high underpinned by a strong showing by the nation's retailers.

The GfK survey's projected reading for April was the highest since December 2001 and follows a protracted period of stagnation in consumer spending as high unemployment and weak wage growth kept German shoppers out of stores and showrooms.

With private consumption representing about 60 per cent of Germany's gross domestic product, the rises in consumer confidence as well as business confidence adds to expectations about the growth outlook for the nation.

The release of the GfK survey came ahead of the German government's plans to hike the nation's consumption tax in January next year and the growing euphoria surrounding the World Cup football championships, which Germany is hosting this year.

"The looming sales tax hike has strengthened shoppers' inclination to spend some money on necessary catch-up purchases," the GfK said. "This is probably fortified by the enthusiasm in the run-up to the soccer World Cup."

The index measuring consumers' willingness to spend increased 7.6 points to 19.5. Some analysts believe that German growth could hit two per cent this year, which is about double what it was last year.

But underscoring the fragile state of private consumption in Germany, the GfK survey showed that the index gauging consumers' income expectations fell.

"Consumers seem to realise the room for manoeuvre for a wage hike is rather limited at the moment," the GfK said. The income expectations component dropped to one in March from 3.2 a month ago.

DPA

Subject: German news

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