German economy boosted as consumers plan spending spree

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The Independent Online

German shoppers have given the economy a boost just days before the World Cup kicks off, a survey showed yesterday.

Sentiment among notoriously nervous German consumers is set to jump to its highest level in nearly five years next month, the market research group GfK said. The boost comes after recent data showing the country's exports are booming once more.

Rising economic optimism and a new-found willingness among shoppers to splash their cash pushed the forward-looking GfK consumer sentiment indicator to 6.8 in June, which was the highest reading since December 2001.

"With the end of the long winter, the mood among consumers has significantly brightened and it looks as if the trough of recent years has now been left behind," GfK's Rolf Buerkl said.

Last week's gross domestic product data showed that private consumption had helped to drive growth of 0.4 per cent in the first quarter, suggesting that the final missing link in the country's nascent economic recovery had been found.

The one caveat to the strong GfK figures is that Germany is planning to raise its value-added tax by 3 percentage points at the start of 2007, which analysts said could be prompting shoppers to bring forward their purchases.

Alexander Koch at HypoVereinsbank said: "We expect that the VAT increase has driven the propensity to consume. Consumers perhaps want to consume and may move up purchases, but their budgets remain limited. That's why we won't see any huge leaps in private consumption. Everything extra that is spent this year will be saved next year."

In a separate development, the country's Vice Chancellor, Franz Müntefering, blamed private investors for undermining the government's attempts to stimulate job creation. In echoes of his now infamous comparison of private-equity groups to "locusts" preying on German assets for short-term profits, Mr Müntefering attacked investors for neglecting their economic and social duties in favour of quick profits.

"In the past, markets used to be embedded more strongly in state-run regulatory frameworks. They have outgrown this and are potentially unchecked and without social rules. Global economic development pays no more heed to nationally devised politics," Mr Müntefering told a conference in Berlin yesterday.

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