German consumer confidence rose to its highest level in nearly six years heading into August, shoring up expectations that household spending will help Europe's largest economy withstand weak demand for its exports.
GfK market research group said on Tuesday its forward-looking consumer sentiment indicator, based on a survey of around 2,000 people, climbed to 7.0 going into August, its highest level since before the global financial crisis in September 2007, from 6.8 the previous month.
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That was above the mid-range forecast in a Reuters poll for a reading of 6.9 and will bolster government hopes that German household spending will offset weaker export markets elsewhere in the euro zone and in China.
"As summer finally arrived in Germany, it was not just the temperature but also the mood of consumers that was rising this month," GfK said in a statement.
"The continued stability of employment prospects and a moderate rate of inflation caused optimism to rise once more."
Consumers in Germany, traditionally a nation of savers, became more willing to spend in July than at any point during the last 18 months as inflation overtakes historically low interest rates being offered by banks.
Most Germans still thought it was a good time for big purchases such as houses in July and others are renovating their homes, often in energy-efficient ways, the survey showed.
For a fourth straight month Germans also expected their personal finances to improve over the next year thanks to a stable labour market, with Germany being the only European country where unemployment has decreased significantly compared with before the global financial crisis in 2007, GfK said.
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The strong wage increases of around 3 percent that Germans have negotiated this year are also boosting purchasing power.
Private consumption prevented Germany from falling into recession at the beginning of 2013 by adding 0.4 percentage points to gross domestic product (GDP) while investments dwindled and foreign trade could only add 0.1 percentage points.
GfK reiterated its forecast that private consumption would increase by around 1 percent this year in real terms but it also warned that German consumers could get wary if the euro zone crisis flared up again.
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Economic expectations rose but the reading for this was only slightly above average, which GfK said pointed to a slow German recovery held back by recession in many euro zone countries and weaker Chinese growth.
Recent data from Germany has been mixed, with the private sector expanding, unemployment falling and business sentiment brightening, though industrial data has been weak and exports have dropped.