Bad news has dogged the economy for longer than anyone cares to remember, but German shoppers don't seem to care - or maybe they just don't trust the banks with their money. New data shows consumer spending is rising.
New statistics released Tuesday show that the mood among German consumers continues to defy both the eurozone crisis and the global economic slowdown.
According to the latest survey from German market research company GfK, a familiarly paradoxical image has emerged, combining improved income expectations and willingness to spend with a downward trend in economic expectations.
Following a value of 5.2 points in October,
GfK's forward-looking general consumption indicator hit 5.3 points for November, up from 5.2 points in October. According to a GfK statement, that means "consumers remain very optimistic."
More spend than save
GfK attributed the paradox primarily to Germany's strong job market and rising salaries, but also noted that ongoing negotiations over the eurozone debt crisis may have had an influence by eroding people's faith in the banking sector.
The EU debt crisis has shaken people's faith in banks
"As a consequence, they are currently less inclined to save money for a rainy day," GfK's Rolf Bürkl told news agency Reuters.
Instead, people are more likely to invest their money where its value can be maintained, such as property and long-lasting consumer goods. The low interest rates available on savings accounts are apparently just not as attractive as that new car.
But the German Bank Association dismissed all such talk. "No, that's not true at all," a spokesman told Deutsche Welle. "Germans are still saving much more money than [people in] other European countries."
At the same time, the overall economic outlook actually worsened, with expectations of future prosperity dropping to their lowest point since August 2009.
The latest reports from various economic research institutes show that Germany's growth dynamic will fall considerably from 2.9 percent in 2011 to just 0.8 percent in 2012.
For now, though, consumers seem happy to continue spending in spite of – or perhaps because of - all the doom and gloom surrounding the eurozone debt crisis, austerity programs, and fears of a debt "contagion" spreading to Germany.
The GfK expects retailers to benefit until the end of the year. "From today's point-of-view, the prospects for the Christmas business don't look that bad," said Bürkl.
Author: Ben Knight
Editor: Sam Edmonds