German consumer morale hits highest level in more than 13 years

[BERLIN] German consumer sentiment jumped to its highest level in more than 13 years heading into March as low oil prices benefited households, freeing up cash for them to spend on other things.

GfK market research group said its consumer sentiment indicator, based on a survey of 2,000 Germans, rose to 9.7 points from 9.3 a month ago.

That was the highest reading since October 2001 and topped the Reuters consensus forecast of 9.5 points.

Private consumption has overtaken exports as Germany's main engine of growth and may keep boosting the economy after the country's biggest labour union, IG Metall, clinched a 3.4 per cent rise in wages for 3.7 million workers.

GfK said consumers were brushing off ongoing tensions between the West and Russia over Ukraine and tensions with Greece over its bailout programme. "(Consumers) are increasingly optimistic," said GfK's Rolf Buerkl in a statement. "The collapse in energy prices is strengthening the purchasing power of private households and leaves room to buy other things," he said.

The survey showed German consumers expect the economy to continue its upward path, helped by low inflation, a weak euro which boosts German exports, and low energy costs.

Consumers were also more optimistic about their future income due partly to a strong labour market and more willing to make purchases than at any time since December 2006, just before the German government raised sales tax.

According to GfK, a one-point change in the indicator corresponds to a year-on-year change of 0.1 percent in private consumption.

The "willingness to buy" indicator represents the balance between positive and negative responses to the question: "Do you think now is a good time to buy major items?" The income expectations sub-index reflects the assessment of those questioned about the general economic situation in the next 12 months.

The additional business cycle expectations index reflects the assessment of those questioned about the general economic situation in the next 12 months.

REUTERS