After slight declines in the previous two months, it seems that German consumers are out and about again this November, and are willing to spend even though Germany’s economy is slowing. Market research group GfK said on Friday that its forward-looking consumer sentiment indicator, based on a survey of around 2,000 Germans, rose to 8.5 going into November from a revised 8.4 in October. It had touched 7 1/2 year highs of 8.9 in July and August.
A recent set of economic indicators have sparked worries among economists and policy makers that Germany’s economy might slow down. Given that Germany has been the main driver of eurozone growth through much of the recovery from the financial crisis, a sharp slowdown of growth, or entry into recession, would significantly undermine economic prospects in the 18-nation eurozone.
Consumer confidence was likely to also be affected if international crises escalate or Africa’s Ebola outbreak spreads.
The German government recently cut its growth outlook for both 2014 and 2015. Still some data remain promising. Unemployment remains near record lows, while incomes are rising and borrowing costs are historically low. GfK said its latest findings suggest that private consumption will continue to be a key pillar of the economy.
“The consumer climate has, for the time being, escaped the impact of the economic slowdown as a result of the various international crises. Private consumption can therefore continue to play its assigned role as a key pillar of the German economy,” said GfK analyst Rolf Buerkl.
“In our view, the state of the German economy is not as bad as disappointing August data and recent sentiment declines made some people believe,” said ING Bank’s economist Carsten Brzeski, adding that the strong labor market, solid private consumption and a recovery of foreign demand on the back of a weaker euro should support the economy in the final quarter of the year.
The GfK reported that Germans’ expectations for their own incomes rose however, as did their willingness to buy, hinting at freer spending in the future. German consumers are benefiting from high employment, rising wages and moderate inflation, breeding confidence about their own economic prospects, the report said.
A subindex measuring personal income expectations rose to 46.9 from a previous 43.4 points. “It is anticipated that this positive development in income expectations will continue over the coming year,” Buerkl said.