Consumer confidence in Europe's biggest economy is holding up, with expectations for household income rising. But Germans are less optimistic about the economy and hold back on spending.
The Nuremberg-based GfK research group released its latest index of consumer confidence Tuesday, seeing the foward-looking barometer edge up slightly to 6 points in March from 5.9 points in February.
The index is based on a survey of about 2,000 households with regards to their expectations about income and the state of the economy, as well as their willingness to spend money.
In March, the GfK expects consumer sentiment to "continue its slow but steady" rise, adding, however, that economic expectations and consumers' willingness to spend "slipped slightly" in spite of "perceptibly rising income expectations."
"German consumers believe that a full recovery of the economy won't come easily, and that the debt crisis at international level is still a risk for the economy," GfK said in its report.
Pay prospects feed optimism
German consumer optimism is boosted mainly by prospects for rising wages with the income barometer soaring by 7.2 points to 41.3 – the highest score since June 2011.
"Against the background of positive employment figures, Germans expect a lot from trade unions in the upcoming wage negotiations," GfK said.
And indeed, the country's metalworkers, chemical and public sector employees are seeking wage hikes of more than 6 percent, backed by government demands for higher wages to spur domestic growth.
However, Germans appear cautious about spending the extra money, as the GfK consumption inclination index dropped slightly by 2.9 points to 39.2 - a figure, however, which the research group still considers comparatively high.
Nevertheless, the GfK report concluded that consumers would remain willing to spend money on goods with a longer shelf life, rather than carrying it to banks "for historic low interest rates."