BERLIN - German consumer morale improved heading into May with shoppers becoming increasingly upbeat about their future income, a survey showed on Wednesday, in a further sign that private consumption will continue to support growth in Europe's largest economy.
The GfK consumer sentiment indicator, based on a survey of around 2,000 Germans, rose to 9.7 heading into May from 9.4 a month earlier.
This was the highest reading since September 2015 and beat the Reuters consensus forecast for the headline figure to remain stable at 9.4.
"The mood among German consumers has hardly ever been better," said Rolf Buerkl, a researcher for Nuremberg-based GfK, adding that consumers were expecting another pay hike this year due to the solid labor market and record-high employment.
The GfK survey showed that consumers were more upbeat about their earnings for the next 12 months, with the index for income expectations rising by seven points to 57.5. This was the highest level since July 2015.
The willingness to buy improved by more than five points to 55.4 while consumers' expectations for the overall economic development brightened by nearly six points to 6.3.
Buerkl pointed to the decision by the government to raise pension entitlements by more than four percent in the West and nearly six percent in the East. "Coupled with the low inflation, this means additional purchasing power," he noted.
The propensity to save fell to the lowest level on record after the European Central Bank's decision in March to further loosen monetary policy. "The ECB's record-low interest rates are indirectly pushing up the willingness to buy," Buerkl noted.
The German economy expanded by 1.7 percent in 2015, its strongest rate in four years, driven by robust private consumption and higher state spending on refugees. It is
expected to grow by around the same amount this year.
Consumers' purchasing power is being boosted by factors such as record-high employment, rising real wages, rock-bottom interest rates and falling car fuel costs.
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