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What crises in Ukraine, Greece? German consumer confidence at highest since dot-com era

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BERLIN — Consumer confidence in Germany has hit its highest level in 13 years, leading an increase across Europe, as low energy costs and interest rates helped offset any concerns about the crises in Ukraine and Greece.

A survey released Thursday showed the rise in German consumer optimism to the highest levels since the dot-com boom buoyed the global economy was driven by an increase in disposable income as energy prices dropped.

The findings were echoed by a report on the wider eurozone, which saw confidence among both consumers and businesses increase to a seven-month high in February.

The region's economic outlook has brightened also thanks to a weaker euro, which helps exporters, and the European Central Bank's decision to provide a big monetary stimulus.

Though cheaper goods are helping consumers in the short term, the possibility that shoppers might come to expect lower prices in the longer-term has been a key concern for policymakers as that could trap the economy in a downward spiral. The ECB cited falling prices as a key concern in deciding to offer its stimulus.

PHOTO: German Chancellor Angela Merkel attends a news conference with the Prime Minister of Sweden Stefan Lofven after a meeting at the chancellery in Berlin, Germany, Wednesday, Feb. 25, 2015.  (AP Photo/Markus Schreiber)
German Chancellor Angela Merkel attends a news conference with the Prime Minister of Sweden Stefan Lofven after a meeting at the chancellery in Berlin, Germany, Wednesday, Feb. 25, 2015. (AP Photo/Markus Schreiber)

For now, the lower cost of living is providing a welcome boost.

Germany's GfK research group said its forward-looking consumer climate index rose to 9.7 points for March from 9.3 in February. That's the highest value since October 2001, when the global economy was riding the wave of the dot-com boom.

The German GfK survey of 2,000 consumers shows increases in their economic and income expectations, as well as their willingness to buy as "the collapse in energy prices is boosting the purchasing power of private households."

"At present, German consumers are seemingly not greatly affected by the recent escalation of the situation in eastern Ukraine, the ongoing tensions between Russia and the West as well as events in Greece," GfK said.

Separately, the unemployment rate dropped to 6.9 percent in February from 7 percent the month before, with just over 3 million people out of work, the Federal Statistical Office said. When adjusted for seasonal factors the rate remained 6.5 percent.

"The German labor market has become solid as a rock and less affected by short-term volatility of the economy," said ING economist Carsten Brzeski. "Combined with low inflation and wage increases of around 3 percent it is no surprise that German consumers are currently very optimistic. "

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