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German consumers dust off their wallets

BERLIN, Jul 27 – Despite the worst economic crisis since 1945, German consumers are ever more confident about the future and willing to part with their hard-earned cash, a closely-watched survey said on Monday.

The GfK institute\’s consumer confidence index rose to an estimated 3.5 points in August from a revised 3.0 points in July, it said in a statement, raising hopes for a consumer-led boost to the ailing economy, Europe\’s biggest.

This represented a fourth consecutive rise and the index now stands at its highest level since June 2008.

A sub-index measuring consumers\’ willingness to buy rose dramatically to 25.1 points from 14.5 points in July and from minus 26.2 points in August 2008.

The institute said low inflation and a relatively stable labour market had made consumers more eager to rush out and make purchases despite the crisis.

"The propensity to buy is also likely to have been boosted by the current low interest rates and the fact that the financial crisis has made saving unpopular at the moment," the institute said.

"Consumers obviously assume that the steep downturn in the economy has come to an end, even if they do not consider the recession to be over," it added.

Looking further ahead, jobless figures would play a key role in the future development of consumer sentiment, the GfK institute said.

"A long-lasting stabilisation of the consumer climate will depend on how the labour market develops in the future. If the unemployment figures climb high … this will be a test for consumer confidence."

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Until now, Germany has managed to keep job losses to a minimum through the use of government-subsidised shorter working hours but companies are beginning to lay off workers, something which often occurs towards the end of downturns.

Tempering the optimism, the institute noted that on "a longer-term comparison … the consumer climate is still at a very low level."

The GfK bases its report on around 2,000 consumer interviews conducted each month.

The survey is the latest to suggest that Europe\’s top economy could be rebounding from its worst slowdown in recent history.

A study by Ernst and Young published in Die Welt daily on Monday showed that two out of three firms in Germany believe the economy will improve by 2010 with nearly eight in ten companies seeing a brighter future by 2011.

Moreover, 54 percent of the businesses polled said that Germany was likely to emerge stronger after the crisis than it was before.

On Friday, a closely-watched survey by the Ifo institute, measuring the mood among German firms, rose for the fourth month running in July.

Nevertheless, the government still sees Germany — one of the world\’s top exporters — shrinking by a record six percent this year.

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