German consumer morale rises for first time since Oct

BERLIN Tue Jan 29, 2013 2:00am EST

BERLIN Jan 29 (Reuters) - German consumer morale rose for the first time in four months heading into February as a lull in the euro zone storm boosted optimism, market research group GfK said, fuelling hopes domestic demand will prop up growth.

The forward-looking consumer sentiment indicator, based on a survey of around 2,000 Germans, rose to 5.8 going into February from an upwardly revised 5.7 in January, boosted by higher income expectations and a greater willingness to make purchases.

The reading beat the consensus forecast in a Reuters poll of 29 economists for a rise to 5.7 in February from January's originally reported 5.6.

"The present calm situation on the financial markets has evidently caused German consumers to be more confident again at the start of 2013," GfK said in a statement on Tuesday.

"Currently there are few negative reports relating to the sovereign debt crisis in the press so Germans are once again focusing on the generally pleasing domestic state of affairs."

The GfK survey is the latest in a string of upbeat sentiment surveys which have shown the mood among German businesses, investors and analysts improving in January.

Consumers are increasingly prepared to splash out on high-value goods as the labour market remains stable and low interest rates give them little incentive to save, GfK said.

The jobless rate remains close to a post-reunification low in Germany, though the number of Germans out of work rose for a ninth month running in December. That gives consumers the planning security they need to buy big-ticket items, GfK said.

The survey provides hope to German retailers who suffered at the end of last year, with retailer Douglas Holding AG saying Christmas sales fell short of its expectations and Metro complaining of a slow start to Christmas trading before this picked up in the final days of the season.

The improvement in shoppers' mood is also a boon to expectations that domestic demand will help prop up growth in Germany, traditionally an export-driven economy, this year.

The German government expects foreign trade to weigh on growth this year as the euro zone weakens demand for high-quality products, though it sees a stable job market, rising wages and moderate inflation boosting private consumption.

Expectations for future earnings rose sharply to their highest level in six months as consumers foresee the labour market situation remaining stable and inflation continuing to be moderate, boosting their purchasing power.

German unions which secured hefty wage hikes last year are pushing for above-inflation raises this year even as the economy teeters on the brink of recession, confident that politicians will back their demands in an election year.

Germany's economy weathered the first two years of the euro zone crisis relatively well, growing by a post-reunification record of 4.2 percent in 2010 and by 3 percent in 2011 but growth slowed to just 0.7 percent last year and is seen weakening to 0.4 percent this year.

Recent data has shown export, imports and orders sliding, though output has risen modestly and the private sector has expanded. Germans' economic expectations improved for the fourth time in five months, which GfK said marked the end of the downward trend.

For a related table, please click on (Reporting by Michelle Martin; editing by Ron Askew)

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