German consumer sentiment is set to rise for an 11th month to its highest level in five years in November as a labour market recovery helps boost income expectations, the GFK market research group said today.
The forward-looking GFK consumer sentiment indicator, based on a survey of 2,000 Germans, rose to 9.2 in November, the highest level since November 2001, from an upwardly revised 8.9 in October, the firm said.
"The notable recovery on the labour market with the fall in unemployment should raise hopes for growth in income and spur cautious optimism," GFK said. The indicator's income expectations component - which is for October - rose to its highest level in five months to a reading of 0.2 from minus 8.8 the previous month.
HVB Group economist Alexander Koch said there had been a clear improvement in the German labour market. The number of jobs paying full social security contributions had increased by a quarter of a million this year and should rise further.
"Together with the recent downward correction in energy prices, this should finally lead to an upward trend in income expectations," he said. "The fundamentals for private consumption have clearly improved."
However, the survey suggested there are still clouds on the horizon. "Consumers' spending power is facing restrictions from high energy costs, the imminent rise in value-added tax and higher healthcare costs," GfK added.
The government is due to raise VAT by three percentage points on January 1st, a move that is expected to significantly dampen consumer spending which accounts for around 60 percent of German gross domestic product (GDP).