German Consumer Confidence Continues To Rise

BERLIN (AP) -- German consumer confidence continues to rise despite the recession, helped chiefly by lower prices and a stable job market, a survey showed Monday.

The GfK research group said its forward-looking consumer climate index for August rose to 3.5 points, up from a revised 3 points for July as more people reported expectations of an economic recovery.

"Private consumption remains the essential pillar of the economy," said GfK economist Rolf Buerkl.

GfK warned, however, of excessive optimism, saying that if the unemployment rate spikes in the fall as is widely predicted, it will seriously dampen the consumer mood.

Germany, Europe's biggest economy, went into recession last year as the global crisis sapped demand for its exports.

The number of jobless have crept up recently, although the impact of the crisis has not yet been dramatic because many employers have used short-time working arrangements to preserve jobs.

In June, the unemployment rate was 8.1 percent. A total of 3.41 million people were registered jobless -- a quarter of a million more than a year earlier.

"A sustained stabilization in the consumer climate will depend above all on the further development of the labor market," GfK said in its statement. "Should there be a considerable rise in the number of unemployed again in late autumn, this would be likely to become an endurance test for consumer sentiment."

In the meantime, GfK said consumers' income expectations are up as dropping inflation rates have left them with more money in their pockets, and their propensity to buy has risen amid falling prices. Low interest rates have also made people less likely to save their money, GfK said.

Consumers' longer-term expectations for the economy over the next 12 months increased in July for the fourth month in a row, rising 8.6 points to minus 14 points -- only six points below the corresponding figure in the previous year and well off the recession low point of nearly minus 33 points at the start of the year, GfK said.

"Consumers obviously assume that the steep downturn in the economy has come to an end, even if they do not consider the recession to be over and they therefore share the opinion of several economic experts who have arrived at a similar assessment," GfK said.

The survey by Nuremberg-based GfK is based on around 2,000 consumer interviews conducted each month.