German consumer and business confidence are at three-year high points and household spending might accelerate growth in the economy, the biggest in Europe, a GfK poll showed today.
The household sentiment indicator by study institute GfK, published for the month to come, posted a solid gain to 4.9 points from 4.3 in September, a figure which was itself revised higher owing to increased expectations for the economy, jobs and personal incomes.
It was released a few days after the Ifo research institute said business sentiment in Germany also rose in September to levels last seen in mid-2007, suggesting that an expected slowdown will not mean a return to recession.
A breakdown of the Ifo data revealed particular optimism among retailers who assessed the current situation to be the best since a boom that followed German reunification in 1990.
'Consumers currently expect the economic upturn to continue in the coming months,' a GfK statement added. 'This is demonstrated by the sharp rise in economic expectations over the last three months,' it added, which posted a sharp gain to 45.2 points, the highest level since March 2001.
In August, German unemployment was stable at 7.6% of the workforce, and the number of jobless is expected to fall below the psychologically significant figure of three million by the end of the year.
'The decisive factor in the strong sentiment among consumers is the extremely positive development of the employment market,' GfK said.
The European Central Bank said yesterday that growth in lending to the euro zone private sector picked up in August, with lending to households in the euro zone growing by 2.9%from the same month a year earlier.
Germany's economy posted strong growth in the first half of 2010, and while the pace has eased since then the country is still on track for a full-year expansion of around 3%, economists and the central bank have said.
GfK said that if the economy stayed on track, unemployment fell further and inflation remained tame, German consumption could see 'growth of up to 0.5% rather than stagnation' this year.
The export-led economy is now also getting traction from domestic consumption and business investment, underpinning expectations that it will continue to act as Europe's economic locomotive.
GfK surveys around 2,000 consumers in Germany for its poll, which is conducted on behalf of the European Commission.
In France, the second biggest euro zone economy, household consumption increased by 2.7% in July before falling by 1.5% in August, the national statistics institute Insee said today.
German inflation highest since November 2008
Prices in Germany rose at their fastest annual rate since November 2008 in September, official data showed today, but the gain was still well below the European Central Bank's inflation threshold.
Inflation rose 1.3% compared to September 2009, driven by higher energy and fruit prices, according to preliminary figures from the Destatis national statistics office. Compared to August, however, prices dropped 0.1%.
A key factor in Germany's low inflation has been relatively modest wage increases but the powerful IG Metall trade union has called for a 6% hike for 85,000 steel workers, launching what could be bitter pay talks.
The German inflation figure still remains well below the European Central Bank's threshold of 'close to, but below 2%'.
