The mood among German consumers rose to its highest level in almost 16 years heading into July, a survey showed, supporting expectations that private consumption will contribute strongly to growth this year. David Pollard reports.
They have something to smile about. Support for Germany's ruling party close to a two-year high as it heads towards federal elections. And so do they. The mood among German consumers at its best since 2001. (SOUNDBITE) (German) GFK RESEARCHER, ROLF BUERKL, SAYING: "Germans are currently feeling elated. All relevant indicators have risen. Income expectations this month are at their best since German reunification". A strong labour market driving growth - and putting money into pockets. The one thing that could spoil the mood, says the GfK: not Brexit - but any potential damage a trade war could do to German jobs. Angela Merkel says she'll make it plain that that's not an option - when she hosts world leaders in Hamburg next week. (SOUNDBITE) (German) GERMAN CHANCELLOR, ANGELA MERKEL, SAYING: "Protectionism cannot be the solution. It harms everyone, and that's why we need open markets. My goal therefore is that the G20 summit sends a clear signal against barriers and for multilateral trade." In the meantime, German growth is heading closer towards two per cent this year, according to forecasts. But so is inflation. (SOUNDBITE) (English) BGC PARTNERS MARKET STRATEGIST, MIKE INGRAM, SAYING: "Yes we are starting to see inflationary pressures build up. Certainly that's the picture we're seeing at the regional level in Germany. So, yeah maybe the end of easy money. Lower for longer no longer. Who knows...?" Possible ECB tightening - now seen as more likely after comments this week by Mario Draghi - the one other thing that could see consumers pull in the purse strings. An irony that won't be lost upon the German government - it's called repeatedly for an end to ultra-loose monetary stimulus ... As Merkel makes her bid for a fourth term as Chancellor this September.