German consumer morale brightens heading into May

BERLIN (Reuters) - German consumer morale improved heading into May with shoppers becoming increasingly upbeat about their future income, a survey showed on Wednesday, in a further sign that private consumption will continue to support growth in Europe's largest economy.

Record-high employment, rising real wages, rock-bottom borrowing costs and falling car fuel costs have boosted the purchasing and spending powers of Germans.

The GfK consumer sentiment indicator, based on a survey of around 2,000 Germans, rose to 9.7 heading into May from 9.4 a month earlier.

This was the highest reading since September 2015 and beat the Reuters consensus forecast for the headline figure to remain stable at 9.4.

"The mood among German consumers has hardly ever been better," said Rolf Buerkl, a researcher for Nuremberg-based GfK, adding that consumers were expecting another pay hike this year due to the solid labor market and record-high employment.

The GfK survey showed that consumers were more upbeat about their earnings for the next 12 months, with the index for income expectations rising by seven points to 57.5. This was the highest level since July 2015.

The willingness to buy improved by more than five points to 55.4 while consumers' expectations for the overall economic development brightened by nearly six points to 6.3.

Buerkl pointed to the decision by the government to raise pension entitlements by more than four percent in the West and nearly six percent in the East.

"Coupled with the low inflation, this means additional purchasing power," he said.

The propensity to save fell to the lowest level on record after the European Central Bank's decision in March to further loosen monetary policy.

"The ECB's record-low interest rates are indirectly pushing up the willingness to buy," Buerkl added.

BayernLB economist Stefan Kipar said the GfK figures were better than expected.

"German consumers are unmoved by a still high number of potentially negative factors, such as credibility of monetary policy, migration, uncertainties over a Brexit and terrorism," he said.

German retail firms are benefiting from the spending mood. The HDE retail association said the sector was helped by the robust labor market, rising wages and low interest rates.

"These are good conditions for us," a HDE spokesman said.

The retail association is expecting sales to rise by two percent to 482 billion euros this year.

The German economy expanded by 1.7 percent in 2015, its strongest rate in four years, driven by robust private consumption and higher state spending on refugees. It is expected to grow by around the same amount this year.

(Reporting by Michael Nienaber and Klaus Lauer, editing by Ed Osmond)

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Sanmina (SANM) Tops Q3 EPS by 54c, Updates Guidance
• Sempra Infrastructure finds compressor damage at ECA LNG project
• Vulcan wins NAFTA case against Mexico but receives minimal damages