German GfK Consumer Optimism Unexpectedly Increases
German consumer confidence unexpectedly increased to a seven-month high as rising incomes encouraged spending.
GfK AG's index for May, based on a survey of about 2,000 people, increased to 5.9 from 4.8 in April, the Nuremberg-based market-research company said in a statement today. Economists predicted the gauge would fall to 4.5, according to the median of 28 estimates in a Bloomberg News survey.
Rising wages and the lowest unemployment in 16 years are cushioning the impact on consumers of faster inflation and slowing economic growth. While industrial production unexpectedly rose in February and manufacturing growth accelerated last month, business confidence fell more than economists forecast this month amid a global credit squeeze.
“Despite continuing turbulence in international financial markets and higher food and energy prices, German consumers are becoming more optimistic,'' GfK said in the report. “Conditions have improved for consumption to pick up this year,'' it said, citing “the upswing on the job market and recent wage agreements.''
The euro pared gained after the report, rising as high as $1.5682 from $1.5630 on April 26. The currency for 15 European countries traded at $1.5650 as of 9:44 a.m paydayloans. in Frankfurt.
A sub-index measuring income expectations jumped to 10.5 from 1.5 and a gauge of consumers' propensity to spend rose to minus 4.7 from minus 10.2. A measure of economic expectations increased to 23.3 from 15.
The jobless rate fell to 7.8 percent in March, the lowest level since August 1992. Workers are achieving bigger pay settlements. The IG Metall union won a 5.2 percent wage increase for about 85,000 steelworkers and German public-sector workers secured a pay increase that unions say is worth 8.9 percent over two years.
Medion AG, the German electronics distributor, said last week that first-quarter earnings rose 60 percent.
Still, faster inflation is eroding purchasing power. The annual rate of price gains matched a 12-year high in March and oil prices climbed to a record above $119 a barrel this month.
“Inflation must weaken in the next few months if consumer confidence is to continue its positive developments,'' GfK said.