German consumers should enter the New Year in slightly higher spirits as the willingness to buy in Europe's largest economy hit a new three-year high in December, the GfK research group said today.
GfK's forward-looking consumer sentiment indicator for January, based on a survey of 2,000 Germans, rose to 2.9 from a downwardly revised 2.6 in December.
It is the fourth consecutive monthly improvement in the indicator, although slightly below economists' forecasts of a rise to 3.0.
"The chances of stronger consumer sentiment in the coming year have improved," Rolf Buerkl, a researcher for GfK, said in a statement.
"However, for a significant recovery of the domestic economy there also need to be more positive signals from the labour market, i.e. an increase in employment and a resultant decline in joblessness," he added.
Economists agreed that people were still worried about their future incomes and there were key reforms to digest which could add to their uncertainty, although consumer spending could make a more positive contribution to growth during 2005.
Consumer spending, which accounts for about 60 percent of Germany's gross domestic product, is vital if the country is to turn a tentative export-led recovery into sustainable growth.
Finance Minister Hans Eichel told German radio today he believed a €6.5 billion income tax cut that takes effect in January would boost the economy.