RTTNews - German consumer sentiment continued its upward movement to reach a 15-month high as disappearing inflation raised income expectations, supporting the propensity to buy.

The forward-looking consumer sentiment index rose to 3.7 for September from a revised 3.4 points in August, a monthly survey by the market research firm GfK showed Thursday. The September reading matched economists' expectations. However, the consumer climate continues to remain at a relatively low level in a longer term comparison.

The market research group said consumer climate would be strongly affected by discernible increases in unemployment over the course of this year. Further upward movement in sentiment would be predominantly dependent upon the sustained labor market development.

The Nuremberg-based GfK conducts its consumer climate MAXX survey each month on behalf of the EU Commission. The survey is based on nearly 2,000 consumer interviews.

Rising for the fifth consecutive month, economic expectations stood at minus 7.5 in August, up from minus 14 in July and minus 21.8 in August 2008. Consumers are increasingly abandoning their economic pessimism as the steep downturn of the German economy seems to have come to an end. With the growth in incoming orders and production, the possibility of economic expansion in the third quarter strengthened.

After turning positive in July, income expectations climbed 7 points to 8.8 in August. This represents an increase of 25 points from the previous year. Sentiment regarding incomes improved as a result of certain measures stemming from the second stimulus package like lower health insurance payments and income tax relief. Again, low levels of inflation also supported income expectations.

The propensity to buy stood at 31.1 points, its highest position since December 2006. This link between consumers' price expectations and their willingness to buy had been witnessed in the past, GfK said. The downward trend in price expectations stimulated the propensity to buy.

Confidence amongst firms also continued its ongoing rise in Germany. Wednesday, the survey conducted by the Munich-based Ifo Institute for Economic Research found that the business climate index rose to 90.5 in August.

In the second quarter, the largest Eurozone economy had expanded 0.3% sequentially, increased for the first time, following four quarter-on-quarter decreases in a row. Thus, the economy recovered from the worst recession since the Second World War.

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