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Last Updated: Friday, 27 January 2006, 10:29 GMT
World Cup lifts German consumers
The Jules Rimet Trophy
World Cup fever is boosting confidence in the economy
For the first time in more than four years, Germans are optimistic about their economy, their incomes and their ability to go shopping, a survey says.

Research group GfK said consumer sentiment had been boosted by trust in the new government and expectations from this year's football World Cup.

But it warned that the optimism depended on the German economy securing existing jobs and creating new ones.

It said the mood could darken after the World Cup if that failed to happen.

Jobs are key

GfK's forward-looking consumer sentiment index beat market forecasts by rising to 4.6 for February, up from 4.0 in January.

The biggest improvement was in people's willingness to buy, which hit its highest level in nearly five years.

Sign in a German unemployment office: "Requests for unemployment benefit"
Chronic unemployment has hit German consumer spending

Consumer spending accounts for nearly 60% of German gross domestic product (GDP), but unemployment of well above 10%, or 4.5 million, has left shoppers clutching their purse strings.

"We are a bit cautious when it comes to consumers," said Sandra Petcov, of investment bank Lehman Brothers.

"We've not seen an increase in jobs and we would need to see that, as well as more income to support consumer confidence in the longer run.

"This could be a 'feel good' factor from the new government."

A report from Germany's Ifo research institute last month said that the economy would emerge from a five-year lull with strong growth in 2006, lifted by exports and stronger investment.

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