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Business

Germany's Pre-World Cup Spending Spree

Germany's economic situation is improving, and a new consumer index released Wednesday indicated Germans will be more willing to shell out money than at any time in the past five years.

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Getting ready to buy those new TVs for the World Cup

Retailers rejoice! Notoriously thrifty Germans are preparing to spend more money in the lead up to the World Cup than they have since 2001, according to consumer researchers Gfk.

The climb means that "consumers will likely contribute to economic growth this year after all," Klaus Wübbenhorst the institute's head, told Reuters TV.


The Nuremberg-based company's index for March climbed to 5 points, up slightly from March and setting forth a trend that first began half a year. Above all the index measuring consumers' readiness to spend climbed 7.6 points to 19.5 points, 32 points above the figure one year ago. Though unemployment is a major problem in eastern Germany, Gfk analysts said it was people living in the East that seemed the most ready to spend, and attributed the gusto to the planned hike in the value-added tax next year. But the World Cup - and plans to buy new TVs and DVD recorders - probably has an effect as well.

Job creation and, gasp, optimism


"The readiness is probably strengthened through World Cup anticipation," read a statement from the group.

Body Shop Filiale in Frankfurt

Spending at a 5-year high?

The news came at the heels of more good economic news. The announcement that the important Ifo economic index reached highs last experienced in 1991, has buoyed analysts. The index reported job increases in several sectors, including the notoriously troubled IT sector. An analyst for Dresdner Kleinwort Wasserstein said that the fear of unemployment might slowly be ebbing.


"The preference to creating jobs is increasing and fear of unemployment among people has decreased," said Rainer Guntermann in an interview with Reuters.

Indicator is exactly that

Should it continue, Wednesday's consumer index announcement, has raised hopes that private consumption will climb 0.5 percent this year, after being stagnant in 2005.

Some analysts urged caution. The index, said Jörg Lüschow of consulting group WestLB, is nothing more than an indication.


"In the end, what people really spend is what's decisive, not what they're planning on spending," he said.

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