German consumer confidence rises

[August 26, 2010]  BERLIN (AP) -- German consumers are upbeat about their economy, a closely watched survey showed Thursday, reflecting the country's overall positive economic trend even as uncertainty lingers over long-term prospects.

Germany's GfK institute said its forward-looking overall indicator for September edged up to 4.1 points from the 4.0 points it registered in August.

The institute attributed the positive mood to falling unemployment and a decrease in the use of a government-funded reduced working plan.

"Consumers clearly do not believe the recovery of the German economy to be a flash in the pan, but rather expect it to continue," the institute said. "Companies share the consumers' optimism."

Still, it warned that "factors of uncertainty" remained for consumers, including possible austerity measures by the government and the expiration of stimulus programs.

The GfK report comes a day after another key survey, by the Ifo research institute, showed business confidence in Europe's biggest economy continues to grow, as companies get more people back to work and the country's reliance on exports is backed by improved domestic demand.

Ifo, based in Munich, said its business confidence index rose to 106.7 points from 106.2 points in July, its highest level in three years.

The GfK report showed German expectations for the economy continued to improve to 46.6 points in August, compared with 36.8 points in July, while expectations for personal income also jumped to 36 points this month from 29.1 points last month.

Economists see the rise in consumer sentiment rooted in Germany's labor market, which managed to avoid major jobs losses despite the global economic downturn thanks to a program through which the government paid companies to keep people in jobs that are now returning to full-time posts.

"The observable hefty turnaround in working hours brings a substantial rise in effective labor incomes, reflected in rising income expectations," wrote Alexander Koch in a research note.

[Associated Press; By MELISSA EDDY]

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