Unfazed by crisis Germans keep on spending | Business| Economy and finance news from a German perspective | DW | 25.05.2012
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Unfazed by crisis Germans keep on spending

The mood among German consumers has stabilized in May after briefly slumping in the last two months because of high fuel prices. A leading consumer index shows Germans intend to go on spending this summer.

Despite weak growth in eurozone countries as well as political turmoil in debt-laden Greece, a forecast of German consumer confidence was stable, market research group GfK said Friday.

GfK's forward-looking consumer climate index showed an unchanged reading of 5.7 points for June after two consecutive months of declines in Europe's biggest economy.

"Consumers are noticeably more optimistic with regard to the economic outlook than they were a month ago," the Nuremberg-based GfK said in a statement, adding a its view that this sentiment was "stable going into the summer."

Official data released Thursday showed that the German economy grew by 0.5 percent in the first quarter of 2012, thus avoiding a recession which holds many eurozone countries in its grip.

Few worries

The headline GfK consumer climate index is based on responses from about 2,000 German households, which are asked about their views of the economic situation, income expectations and willingness to spend money in the months ahead.

For June, the propensity for Germans to spend had "increased moderately," the research group found, which showed ongoing trust in the economic upswing.

Consumers' expectations for rising pay, however, dropped slightly, but remained at a "high level," GfK added.

Substantial wage hikes achieved by German labor unions in recent months, have boosted private consumption to an extent that it has become the second pillar of economic growth after exports.

Citigroup analyst Jürgen Michels told Reuters news agency that rising wages and low unemployment had "stabilized" consumer sentiment, adding that "declining fuel prices in recent weeks mean that Germans are in the comfortable position of seeing hikes in real incomes."

Christian Schulz, economist with Berenberg Bank told Reuters that he was surprised that the bad news from Greece didn't dent Germans' spending mood, but warned at the same time that "if the debt crisis is not brought under control it would be unlikely to remain so."

uhe/sms (AFP, dpa, Reuters)