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Consumption

German consumer mood brightens on ECB rate cut

Consumer confidence in Europe's biggest economy is rising again, buoyed by cheap money from the European Central Bank (ECB). As a result, the closely watched GfK index has edged higher after remaining stable for months.

German consumer moods were set to brighten further, research group GfK said Wednesday as it released its forward-looking Consumer Confidence Index.

The closely monitored barometer for July edged up to a reading of 8.9 points from a revised 8.6 points in the previous month.

"The additional cut in interest rates by the ECB and the decision to charge banks for parking their money at the central bank has given the consumer climate an extra boost and is the main reason behind the rise in consumer confidence," GfK said in a statement.

Earlier this month, the ECB rolled out an unprecedented package of measures, including negative interest rates and targeted measures to kickstart lending to businesses. The move is intended to spur growth in the eurozone and avert the threat of falling prices in the crisis-hit currency area.

Real wages rising in Germany

GfK said the ECB's fiscal policy had a strong negative impact on the propensity to save in Germany, supporting instead consumers' willingness to buy.

GfK's Consumer Confidence Index is based on responses from about 2,000 households regarding their expectations about pay, spending and the economy as a whole. The index has stagnated for the past four months.

July's index reading is the highest since December 2006, reflecting consumers' buoyant moods caused by rising real wages and a stable labor market. GfK warned, however, that an escalation in the crises in Ukraine and Iraq were likely to dampen sentiments among consumers and businesses.

uhe/cjc (AFP, dpa)

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