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German Consumer Sentiment to Reach 5-Year High in June, GfK Says

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May 24 (Bloomberg) -- German consumer confidence will jump to the highest in more than 5 1/2 years in June as low unemployment and receding inflation encourage households to spend, GfK AG said.

The market research company forecast today that its consumer-sentiment index, based on a survey of about 2,000 people, will increase to 6.5 next month from 6.2 in May. That would be the highest since September 2007. Economists expected the index to remain unchanged, according to the median of 26 estimates in a Bloomberg News survey.

“High-level employment, solid wage deals and easing inflation are supporting sentiment,” Nuremberg-based GfK said in an e-mailed statement. “In addition, the positive development of the consumer climate is bolstered by a low propensity to save, which has reached a new historic low.”

The German economy, Europe’s largest, grew just 0.1 percent in the first quarter, less than economists forecast, as severe winter weather damped construction and investment. Growth was driven “almost exclusively” by household spending, the Federal Statistics Office said. At 6.9 percent, the unemployment rate remains near a two-decade low, and unions are winning bigger pay increases for workers.

GfK’s measure of economic expectations rose to minus 0.2 in May from minus 1.5 in April. An index measuring income expectations jumped to 33.9 from 30.8, while a gauge of consumers’ willingness to buy increased to 37.7 from 37.6.

“The German economy can recover further in the course of the year, but the process will probably be rather slow,” GfK said, adding that exports to the euro area “will probably develop moderately.”

The European Central Bank this month cut its benchmark interest rate to a record low of 0.5 percent as a recession in the 17-nation euro region extended to a sixth straight quarter and inflation fell to 1.2 percent in April.

To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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