German consumer confidence up strongly

By JUERGEN BAETZ Associated Press Writer

BERLIN (AP) - German consumer confidence is up strongly, boosted by expectations that a quicker economic recovery will keep unemployment in check and by cheer over the football World Cup and sunny weather, a survey showed Tuesday.

Germany's GfK institute said its forward-looking overall indicator for August rose to 3.9 points from 3.6 points in July, its highest level since November 2009.

"The good performance of Germany's football team in the World Cup, the warm summer weather and the upbeat news from the labor market have generated positive sentiment among Germans," GfK said.

The agency said the indicator for economic expectations made significant gains, rising by 31.3 points to 36.8 points - the highest figure since the early days of the financial crisis in October 2007.

"Consumers expect the recovery (...) not only to continue further but even to gain additional momentum," GfK said in a statement.

The indicator monitoring people's propensity to buy sustained a slight loss of 2.5 points, edging down to 27.9 points - but that is "extremely good and well above the long-term average," the group said.

Income expectations in Germany, Europe's largest economy, also rose, boosted by the recovery and the surprisingly positive employment situation, it said.

"The improvement in overall consumer sentiment was largely triggered by lower unemployment fears of consumers," UniCredit economist Andreas Rees said.

Germany's unemployment rate in June was a relatively low 7.5 percent.

The positive news from the labor market outweighed the impact of impending burdens like the austerity package to reduce Germany's deficit - worth some euro80 billion by 2014 - and the prospect of higher health insurance contributions that will weaken household incomes.

Germany has settled into a recovery over the past year as healthier global demand helps its exports. Some economists now forecast that the country's output could grow by 2 percent or more in 2010.

The closely watched Ifo business confidence index also has continued its upward trend. In July it showed the biggest increase since the country's reunification in 1990, rising to 106.2 points from 101.8 points the previous month.

However, economist Rees remained cautious.

"There is no reason for euphoria, since the potential for really positive surprises is clearly limited," he said.

"The recent improvement on the German labor market was primarily caused by a rise in temporary work and not in 'secure' jobs."