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German consumption

September 28, 2010

Consumers in Germany look forward to buying more goods and services. And economists, among others, are happy: consumer spending has long been a weak point in the country's economic performance.

German consumer with shopping bags
Consumers in Germany are happily purchasing againImage: picture-alliance/ dpa

German consumer confidence continues to climb as the economy strengthens and unemployment falls, boosting income expectations, according to a survey.

The GfK market research institute said Tuesday that its forward-looking consumer confidence index for October rose to 4.9 points, up from a revised 4.3 in September, representing a three-year high.

"The decisive factor in the strong sentiment among consumers is the extremely positive development of the employment market," GfK said in a statement.

Falling unemployment

Germany's unemployment rate was 7.6 percent last month. That was approximately the level at which it was when the US investment bank Lehman Brothers collapsed two years ago, fueling a global financial crisis.

Worker in a factory
Falling unemployment is bolstering consumer confidenceImage: Silvia Tagge

Although the German economy is showing signs of slower growth in the second half of the year, the Federal Labor Agency's IAB research institute expects unemployment to drop slightly below 3 million people in 2011 to a nine-year low.

Low inflation

GfK also pointed to the low level of inflation, currently at around 1 percent, as another factor increasing consumer purchasing power. The market researcher added that consumers in Germany are already experiencing an improved income situation; according to new data from the Federal Statistical Office, gross monthly income after living expenses increased by 2.3 percent in the second quarter.

Germany, Europe's biggest economy, has enjoyed strong export-led growth this year. Its massive 2.2 percent growth in the second quarter over the previous three-month period has helped the 16-nation eurozone outperform the US.

Author: John Blau (ap)