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Germans more positive on hope of better wages and jobs

German consumer confidence is rising, helped by an increase in income expectations and a job market that has remained stable despite the recession, a survey showed yesterday.

The GfK research group said its forward-looking consumer climate index for July stood at 2.9 points, up from a revised 2.6 points in June.

The Nuremberg-based agency noted that consumer sentiment remains at a low level overall, but said the recent uptick, following a period of stagnation, was encouraging.

"Following the recent growing number of signs that the economic downturn may be at an end, consumer hopes of economic stabilization are intensifying and, accordingly, economic expectations are increasing moderately," GfK said in a statement.

Reports that inflation was zero percent in May and employment remained "fairly robust" helped boost consumers' income expectations and their propensity to buy, the agency said.

Germany's jobless rate dropped slightly to 8.2 percent in May, thanks to a regular spring boost, but showed no signs of a lasting recovery. The government has predicted that the number of Germans out of work will average some 3.7 million this year - a climb of some 450,000 from 2008 - before rising next year to 4.6 million.

"The real test is yet to come, given the likelihood of rising unemployment in the months ahead," GfK said.

Analyst Alexander Koch, with the HVB-UniCredit Group, said he expects that job uncertainty should "increasingly dominate consumer behavior" in the months to come.

"This is underscored by extensive layoff plans of companies, and record-high unemployment expectations," Koch said in a research note.

Germany, Europe's biggest economy, went into recession last year as the global crisis sapped demand for its exports. The country's central bank predicted this month the economy will shrink by 6.2 percent this year and stagnate in 2010.


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