By Palash R. Ghosh: Subscribe to Palash's RSS feed
July 27, 2010 1:34 PM EDT
Germany's GfK institute said its forward-looking overall indicator for August rose to 3.9 points – its highest level since November 2009 – from 3.6 points in July, suggesting that German consumers are optimistic about the progress of economic recovery.
The spike in consumer confidence follows on the heels of the Ifo business confidence index which jumped in July.
Apparently, German citizens are overlooking some black clouds on the horizon – namely the government's impending austerity package to reduce the deficit and the possibility of higher health insurance contributions.
Gfk attributed the buoyant consumer sentiment reading to the “good performance of Germany's football team in the World Cup, the warm summer weather and the upbeat news from the labor market.”
The indicator for economic expectations scored particularly large gains, surging by 31.3 points to 36.8 points – its highest level since October 2007.
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Income expectations in Germany also advanced, driven by the economic recovery and the surprisingly positive employment situation, GfK added. [Germany has an unemployment rate of 7.5 percent, among the lowest in the euro zone, while the jobless rate fell for the twelfth straight month in June.]
The indicator which tracks people's propensity to buy edged down by 2.5 points to 27.9 points — however, GfK indicated that figure is still "extremely good and well above the long-term average.”
The GfK insisted the optimistic attitude of consumers reflects a tangible improvement in economic prospects.
“Consumers expect the recovery of the German economy not only to continue further but even to gain additional momentum,” GfK stated.
GfK cited that German economic forecasters expect the number of unemployed to fall below three million this autumn. Leading authorities are forecasting solid economic growth for the country in 2010, following last year's tumble,
Deutsche Bundesbank expects a 1.9% advance in the GDP this year, while The Institute of Economic Research is expecting 2.1% growth.
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