German consumer confidence climbs to 7 year high

Germany's consumer confidence climbed to its highest level since January 2007, as Germans remained optimistic about the outlook of the Europe's largest economy and their future income, a survey found on Wednesday. Based on a poll on 2,000 consumers, Nuremberg-based think tank GfK found that its forward-looking consumer sentiment indicator rose to 8.5 points into March, up from the revised 8.3 points in February. "Consumers are still confident that the German economy has overcome its weak phase in the previous year and is entering a solid upswing," said GfK in a statement. On Tuesday, German Federal Statistical Office confirmed the German economy was stimulated by exports and expanded by 0.4 percent in the last quarter of 2013. Private consumption dropped slightly despite economists' expectation that it would continue to be a main driving force for growth in the new year. GfK predicted that private consumption would grow by 1.5 percent in 2014, following an increase of 0.9 percent in 2013. "This positive development (of consumer sentiment indicator) provides a good foundation for private consumption continuing to play a key role in economic growth this year," the institute said. According to the poll, German consumers' income expectation in February rose once again on the 13-year high of the previous months. Their willingness to buy remained at a high level despite a slight drop from its seven-year high of January. GfK said low interest rate, stable labour market and rising income encouraged consumers to open their wallets, citing that chemical industry had concluded a collective pay negotiation and wages would be increased by 3.7 percent over 14 months in the industry. "This agreement is likely to act as a stimulus for other industries to also conclude new agreements this year," it said. Munich-based think tank Ifo also found in its recent survey that business morale in Germany hit the highest level since July 2011 in February, sending another signal that investment engine of the growth may be restarted in the new year. According to the government's forecast, the country's economy would grow by 1.8 percent in 2014, driven mainly by domestic consumption and investment. The German industries were more optimistic as the Association of German Chambers of Commerce and Industry (DIHK) has raised its growth forecast to 2 percent.