German consumer confidence is holding up despite growing fears that the domestic economy may not remain unscathed by the euro debt crisis. But higher wages see people spending more for the time being.
Confidence among consumers in Germany is set to rise slightly in July, the Nuremberg-based GfK research group reported on Tuesday in its forward-looking confidence index. The closely-watched barometer would rise to 5.7 points from 5.6 points in June, the survey maintained on the basis of a poll among 2,000 households across the country.
"The consumer climate is defying the intensification of the eurozone debt crisis, but sentiment is mixed," the GfK group said. It also pointed to a recent poll by the Ifo economic research institute which saw the business climate in Germany dropping to its lowest level in over two years.
There are indeed growing fears that Germany will find itself increasingly sucked into the mainstream of the debt crisis. But for the time being, consumers are willing to spend even more than in the months before.
Inflation kept at bay
GfK researchers attributed the rise in consumer confidence to higher incomes which were offsetting the impact of the financial crisis. They also cited a low inflation rate and rapidly decreasing fuel prices which left more money to spend in people's pockets.
GfK Economist Rolf Bürkl said a stable consumption level was conducive to warding off a recession in the country. Private consumption is still expected to rise by 1.0 percent in real terms throughout 2012.
"The situation of private households remains fundamentally positive not least because of low unemployment," Berenberg Bank Analyst Christian Schulz told Reuters news agency. "Even if growth is dented in the upcoming summer months, robust consumption will make sure the decline won't be too big."