Going for Growth

Can German shoppers save the euro zone?

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 retail sales rose by 1.7 percent on the month in April, more than the expected 1 percent, in another sign that notoriously cautious German consumers are putting their hands in their pockets.

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.

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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."

The data is part of a recent wave of optimism about Europe's largest economy, which has seen growth forecasts raised for 2015. Whether this means Germans will be boosting economies outside their borders by buying up their goods is another matter.

While there has been a rise in German imports in recent months, this has been outstripped by the growth in exports.

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Germany's taxes and laws are famously engineered to boost output and exports and limit consumption. This has led to a budgetary surplus forecast to hit 7.9 percent of gross domestic product this year – the highest for decades – and a nation of careful savers.

The case against this policy argues that a lower savings ratio, and higher consumer spending, should give a major boost to Germany's European neighbours, many of whom are in need of it.

On the other hand, Germany is facing a demographic time bomb as its population ages, so those savings are going to come in handy in 2050 - when 39 percent of the population will be over 60, according to United Nations projections.

"The criticism of Germany's widening current account surpluses, which mirror high current savings – not only by households – is still likely to intensify," Deutsche Bank economists warned.

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- By CNBC's Catherine Boyle