German Consumers’ Optimistic May Impact EZ

A perfect storm of the lowest jobless rate since East and West Germany were reunited, low energy prices and ultra-low interest rates seems to have finally got the normally conservative country spending.

German consumers are currently more optimistic than at any time since the GfK research group started compiling its forward-looking consumer confidence index in the 1990s, with the index hitting 10.2 points for June, up from 10.1 points in May.  The rise in sentiment is “unassailable” according to Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.

“If sentiment and spending continue to surge, it will eventually eat its way into the external balance, but a current account surplus of almost 7 percent of GDP does not disappear overnight,” he said, adding, “The surplus has been rising in the last 12 months, despite the solid recovery in consumers’ spending. A weaker euro is a big boost here, especially relative to the U.S. and the U.K. where the surplus has increased the most.”