BERLIN (AP) -- German consumer confidence is improving thanks to low inflation and a newly introduced bonus for scrapping old cars, according to a survey released Thursday.
The GfK research group said its forward-looking consumer climate index for March stands at 2.6 points, up from 2.3 in February -- a figure revised upward from the initial forecast of 2.2.
Although the indicator remains low, GfK said the reading "reinforces indications that consumption is helping to tone down the economic slump this year."
The German economy -- Europe's biggest -- went into recession last year as demand for the country's exports dried up amid the global economic crisis. It contracted by a painful 2.1 percent in the fourth quarter.
The government has drawn up a euro50 billion ($64 billion) stimulus package -- including a popular euro2,500 bonus for people who scrap aging cars and buy new ones.
"The latest inflation rate of below 1 percent and the bonus for scrapping old cars are currently supporting the consumer mood," GfK said in a statement. "Consumers can see that their purchasing power is stronger and are consequently assessing their income prospects more optimistically."
GfK said a subindex measuring consumers' propensity to buy slipped only modestly in February -- to 14.6 points from 15.5 -- after surging the previous month.
Consumers' economic outlook improved, following four months of declines, amid cautious optimism that the economy will turn around later this year. Their income expectations also improved after falling in January.
Further developments "will depend on whether the financial crisis will become an employment market crisis," GfK said.