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Consumption

Consumer confidence in Germany highest since 2007

German consumers are in a shopping mood. A survey of consumer confidence by marketing agency GfK has hit its highest value since early 2007, before the global banking crisis started.

In June, for the fourth month in a row, the Gfk's barometer showed a steady positive value, higher than any since early 2007. What that means is that German consumers are, on balance, looking forward to the next twelve months with optimism, and expecting to spend more money than usual.

The Nuremberg-based market research agency GfK maintains a monthly barometer of consumer confidence. It asks consumers selected through a random poll three questions: How do respondents think general economic conditions will evolve in the next twelve months? How will their own household's financial situation evolve? And is now a good time to make large consumer purchases?

In each case, respondents have a choice of three answers: Improving, neutral, or worsening. From those responses, GfK calculates a statistical measure of overall consumer sentiment.

Robust labor market

With inflation-adjusted incomes rising slightly, joblessness low relative to elsewhere in the eurozone, and interest rates so low as to make saving less attractive than spending, economic conditions are encouraging Germans to consume. GfK projects that the country's consumers will spend 1.5 percent more in 2014 than they did in 2013 (measured in inflation-adjusted numbers).

The shopping diet

That's important, because private consumption accounts for 57 percent of gross domestic product in Germany. But GfK spokesman Rolf Bürkl notes that the trend toward greater consumption isn't likely to climb much further, since consumer confidence is already very high.

He identifies possible rises in oil and gas prices - which could occur if geopolitical tensions over Ukraine increase - as a downside risk to consumers' plans to spend more, noting that if consumers have to spend more money on fuel, they'll have less money to spend on other purchases.

nz/hg (dpa, Reuters)

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