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German Consumer Confidence Rises Despite Recession

Consumer confidence has defied country's slide into recession to rise slightly, as falling fuel prices and an industrial wage deal help boost workers' income outlook.

BERLIN (AP) -- German consumer confidence has defied the country's slide into recession to show another small improvement, as falling fuel prices and an industrial wage deal help boost workers' income outlook, a survey found Tuesday.

The GfK research group said its forward-looking consumer climate index for December stood at 2.2 points -- up from 1.9 points in November and the third consecutive small increase, although the level remains low.

The improvement comes despite this month's news that the German economy, Europe's biggest, went into recession in the third quarter, and a day after another survey showed business confidence at a 15-year low.

Still, figures have shown that the global economic crisis has yet to translate into higher unemployment.

So far, the financial crisis "on the whole is not affecting consumer sentiment," GfK said in a statement. "Consumers assume that they will not be particularly affected by the economic low and believe there is no need to further restrict their willingness to buy at the moment."

Tuesday's survey found that an index measuring Germans' income expectations improved by six points in November to minus 6.9 -- its fourth consecutive increase.

GfK pointed to the recent fall in oil prices, and said a deal in which Germany's biggest industrial union secured a 4.2 percent pay rise over 18 months for manufacturing workers prompted expectations of "real income rises" in other sectors.

An index measuring consumers' propensity to buy rose by 11.5 points to a still-low minus 6.7 in November, even as their economic expectations dropped by 3.6 points to minus 30.1 -- a record low since the survey started in 1991.

Underlining the dark outlook, Germany's Federal Statistical Office on Tuesday released details of the factors behind the economy's 0.5 percent contraction in the third quarter, pointing to a "highly negative trend of net exports."

Exports, which have powered Germany's economy over recent years, were down 0.4 percent from the previous quarter while imports rose by 3.8 percent.

Andreas Rees, an economist at UniCredit in Munich, said exports would drop more sharply in the coming months, and that weakness will start carrying over into companies' investment activity.

"Even if the oil price decreases further, consumers are clearly no match for the weakness in the company sector, especially in the light of rising unemployment next year," he said, forecasting that the recession will continue until mid-2009.

GfK's monthly survey is based on interviews with some 2,000 consumers.

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