German Consumer Confidence Climbs

BERLIN (AP) -- German consumer confidence is rising, helped by an increase in income expectations and a job market that has remained stable despite the recession, a survey showed Tuesday.

The GfK research group said its forward-looking consumer climate index for July stood at 2.9 points, up from a revised 2.6 points in June.

The Nuremberg-based agency noted that consumer sentiment remains at a low level overall, but said the recent uptick, following a period of stagnation, was encouraging.

"Following the recent growing number of signs that the economic downturn may be at an end, consumer hopes of economic stabilization are intensifying and, accordingly, economic expectations are increasing moderately," GfK said in a statement.

Reports that inflation stood at 0 percent in May and that employment remained "fairly robust" helped boost consumers' income expectations and their propensity to buy, the agency said.

Germany's jobless rate dropped slightly to 8.2 percent in May, thanks to a regular spring boost, but showed no signs of a lasting recovery. The government has predicted that the number of Germans out of work will average some 3.7 million this year -- an increase of some 450,000 from 2008 -- before rising more sharply next year to 4.6 million.

"The real test is yet to come, given the likelihood of rising unemployment in the months ahead," GfK said.

Analyst Alexander Koch, with the HVB-UniCredit Group, said he expects that job uncertainty should "increasingly dominate consumer behavior" in the months to come.

"This is underscored by extensive layoff plans of companies, and record-high unemployment expectations," Koch said in a research note.

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

While surveys of business and investor confidence have turned upward recently, forecasts remain gloomy. The country's central bank predicted this month that the economy will shrink by 6.2 percent this year and stagnate in 2010.

The RWI research group on Tuesday revised its prediction downward again, saying it now expects a 6.4 percent GDP drop this year -- even worse than the Bundesbank's prediction.

It said, however, that the drop should taper off, and that by the end of next year "a light GDP increase of 0.2 percent is possible."

According to the GfK report, consumer expectations for the next 12 months increased in June for the third month in a row, rising 5.7 points from the month before to minus 22.6 points.

"Economic pessimism is declining somewhat and consumers seem to be expecting that the steep economic decline can gradually be halted," the GfK said.

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

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