German consumer confidence is set to improve further to its highest level in more than 13 years in April, as weak euro and low inflation function as mini stimulus to the economy, survey data from the market research group GfK showed Thursday.
The forward-looking consumer sentiment index rose to 10 in April from 9.7 points in March. This was the highest score since October 2001. The index was expected to rise marginally to 9.8.
German consumers have become real optimists and any worries about the current Greek crisis were clearly outweighed by low inflation and the strong labor market, said Carsten Brzeski, chief economist at ING-DiBa.
Today’s consumer confidence indicator confirms the view that private consumption should be an even more important growth driver this year, he noted.
GfK confirmed its forecast for consumer spending that it estimated at the start of the year. Consumer spending is expected to grow around 1.5 percent this year.
All sub-indicators of consumer confidence namely economic expectations, income outlook and the willingness to buy strengthened further in March.
Economic expectations improved for the fourth straight month in March. The corresponding index rose 9.6 points to 36.8 in March. A higher value of 45.9 was last seen in July 2014.
The weakness of the euro significantly improved the competitiveness of exports outside the Eurozone. In addition, the effect of low energy costs is similar to a mini stimulus program, the GfK noted.
Consequently, economic experts see the growth forecast of 1.5 percent for this year as too conservative.
Given the significant improvement in the economic outlook, the income expectations sub-index gained 2.5 points to 53.1. This was the third consecutive rise in the measure.
The combination of rising employment, good collective wage agreements and low inflation caused consumers’ income optimism to rise further.
After a sixth consecutive rise, the willingness to buy has once again surpassed its eight-year high. An increase of 3.9 points led the indicator to 63 points in March.
The propensity to consume was 1.4 points below its highest ever value of 64.4 points in October 2006, shortly before the value added tax increase. As saving is currently not appealing due to low interest rate, consumers prefer spending, the GfK said.
The survey is based on around 2,000 consumer interviews conducted each month, on behalf of the European Commission.
The Bundesbank in its monthly report released Monday said there are signs of a continued vigorous upward economic movement in the second quarter.
The bank said the German economy has probably grown strongly in the first quarter of 2015, after a surprisingly strong expansion at the end of 2014.
The Organization for Economic Cooperation and Development last week predicted that the largest euro area economy will grow 1.7 percent this year and 2.2 percent in 2016.
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