German wages, consumer confidence rising, data show

26th March 2015, Comments 0 comments

German salaries are rising faster than expected, official data showed on Thursday, which augurs well for a continuation of the consumer-driven recovery that Europe's biggest economy is currently enjoying, analysts said.

When adjusted for inflation, "real" salaries in Germany increased by 1.7 percent in 2014, the strongest increase in six years, the federal statistics office Destatis said in a statement.

In nominal terms -- or not taking inflation into account -- wages increased by 2.6 percent in Germany last year, Destatis noted.

Both figures were revised upwards from a previous estimate in February.

"Both the regular salary components as well as bonus payments contributed to this increase," the statisticians said.

Rising wages look likely to help keep Germany's economic recovery on track, especially with consumer confidence currently higher than it has been in 13 years, analysts said.

Market research company GfK, which calculates a monthly consumer confidence index, said households were feeling increasingly optimistic about their income expectations and the outlook for the economy as a whole.

As a result, they were increasingly willing to open their purses and spend money.

"The tug of war in Europe over the future of Greece has left no impression whatsoever on German consumers," GfK said.

"Consumers feel the economy is in a clear uptrend, buoyed by the weak euro, which boosts exports, and low energy costs," it said.

"Income expectations and a willingness to spend are rising in tandem with the brighter economic prospects."

Looking ahead to next month, GfK's headline household confidence index was forecast to rise to 10.0 points in April -- the highest level since October 2001 -- from 9.7 points in March.

- Consumption boom -

Analysts welcomed the data.

"German consumers have become real optimists and any worries about the current Greek crisis were clearly outweighed by low inflation and the strong labour market," said ING DiBa economist Carsten Brzeski.

"This is not a debt-driven shopping craze, but rather an indulgence-and-there-is-no-alternative consumption boom. On the back of the strong labour market, wage increases, low inflation and low interest rates, private consumption has become an important growth driver," Brzeski said.

BayernLB economist Stefan Kipar agreed.

"There is hardly anything standing in the way of strong consumption growth in 2015," he said.

"A potential escalation of Greece's debt problems may lead consumers to start holding back on their purchases. But as long as they don't perceive any risk for a break-up of currency union, and there are no major geopolitical accidents, 2015 will be a good year for the consumer," Kipar said.

Berenberg Bank economist Christian Schulz said that "a robust labour market, normal wage rises and cheap oil combine to provide a strong tailwind for German consumption and for confidence indicators to rise further in the coming months".

Fading risks and major stimulus boded well for economic growth this year, he said.

"If the still great political risks in Europe do not materialise, Germany looks set to enjoy yet another extended spell of its 'Golden Decade'," Schulz concluded.

© 2015 AFP

0 Comments To This Article