Time to rethink Germany

25 June 2014 By Olaf Storbeck

Rising real wages and strong consumer confidence confirm that Europe’s biggest economy has changed gears. Gone are the days of a purely export-driven boom and poor domestic consumption. The new minimum wage will only reinforce the trend, to the benefit of the whole euro zone.

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German consumer morale rose to its highest level in more than seven and a half years heading into July, market research group GfK said on June 25. Its forward-looking consumer sentiment indicator, based on a survey of 2,000 people, climbed to 8.9 going into July after an upwardly revised reading of 8.6 in June. That was its strongest reading since December 2006 and confounded the 8.5 consensus forecast in a Reuters poll.

Inflation-adjusted wages in Germany rose by the largest amount in almost three years in the first quarter, the country’s statistical office reported on June 24. Real wages climbed by 1.3 percent between January and March compared with the same period in 2013. That’s the biggest increase since the second quarter of 2011.

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