GfK's September report, which surveyed 2,000 consumers, recorded the sixth consecutive monthly rise in consumer spending, and its "consumer climate index" predicts an increase of 4.3 points for October, compared to a 3.8-point rise in the previous month.

"Private consumption has remained the main crutch of the German economy this year," commented GfK expert Rolf Buerkl. But he warned that a sustainable recovery is dependent on a healthy job market.

"If unemployment rises significantly in the coming months, it will put an extra burden on consumers and depress spending," Buerkl said.

Consumers think the crisis is over

According to the GfK, consumers have been encouraged in recent months because prices have remained stable and the economic crisis has not made itself felt in the job market yet. On top of this, the GfK institute believes that news that the German economy recovered from its one-year recession in the second quarter of this year has led consumers to believe that the economic crisis is all but over.

"Many consumers see more cash in their pockets because prices have been stable and have even sunk," Buerkl commented. "This extra spending power has allayed fears about losing jobs and the threat of rising unemployment in the country."

An increase in credit purchases also shows that expectations about personal income are now at the highest they have been for two years, and that there is more confidence in future income.

Most economists however predict higher unemployment in the fall, and many warn that the expected collapse in the job market has been delayed by massive government bailouts in the past months. "Many companies are currently facing the decision on whether to increase part-time work," Buerkl said.

bk/Reuters/AFP
Editor: Andreas Illmer