--German economy running smoothly, despite euro zone crisis
--Unemployment expected to keep falling
--Willingness to buy hasn't been higher in over five years
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By Todd Buell
OF DOW JONES NEWSWIRES
FRANKFURT -(Dow Jones)- German consumers remain upbeat about the country's economic prospects, despite the threat of the European debt crisis, the consumer research firm GfK reported Thursday.
GfK said its forward-looking indicator will remain in strong territory and is due to increase to 5.9 points in February from an upwardly revised 5.7 points in January. The February prediction beats a survey of economists conducted by Dow Jones Newswires, which had projected a reading of 5.6 points. January's index was initially reported at 5.6 points.
"Consumers are battling against the mounting trend towards recession throughout Europe," GfK said in a statement. The group added that this development will likely weigh on the German economy as struggling European partner countries make it harder for Germany to retain strong export figures. Nevertheless, "so far, the economic engine in Germany is still running smoothly."
GfK said that even against the backdrop of a slowing economy, Germany's employment situation "will remain positive." The research firm also pointed to data from Germany's Ifo Institute showing that companies "continue to look to the future with optimism."
Ifo announced Wednesday that its key indicator of business confidence rose for the third straight month, beating expectations. While businesses' assessments of their current situation fell slightly, six-month expectations outperformed forecasts. "The German economy has started the year positively," Ifo wrote.
GfK attributed the upbeat outlook in part to a lull in media coverage of Europe's debt crisis over the holiday season. But with the crisis once again generating headlines, the effect on German consumer moods remains an open question.
While GfK's overall consumer climate index refers to the following month, its sub-indexes--economic expectations, income expectations and buying propensity--refer to the current month. The sub-indexes all increased in January, though income expectations only grew by 0.1 point.
The economic expectations index increased to 7.5 points in January from -0.9 points in the previous month. Income expectations inched up to 34.1 points from 34.0 points, while willingness to buy surged to 41.8 points from 27.4 points.
Income expectations were boosted by the "extremely positive situation" on the German labor market, where it is expected that unemployment will keep falling. Also a labor shortage in some fields is upping expectations of salary rises.
The willingness-to-buy category matched its level of one year ago and has not had a higher value since Dec. 2006. GfK cites numerous reasons for this: "The positive development in employment is reducing fears of unemployment and is therefore strengthening confidence in planning for the future."
Moreover, the debt crisis has motivated some Germans to make big purchases rather than save, the report said. Given lack of trust in financial markets and "historically low interest rates," German consumers appear to be more keen to make high-value purchases than to save, GfK said.