German consumer confidence has surged to a five-year high, a survey released Wednesday showed, as shoppers in Europe's biggest economy geared up to spend ahead of next January's planned big jump in sales tax, REPORTED DPA. The GfK market research institute said its forward-looking consumer climate index will rise to 8.8 points in October, after the index climbed to 8.6 points in September. The index stood at 8.5 points in August. Economists had predicted that the index would remain at 8.6 points in October. The increase in the October reading also came against the backdrop of falling unemployment and a retreat in energy prices, which helped to trigger a drop in the nation's inflation rate to its lowest level in more than 2 years. The country's statistics office said this month that September inflation came in at an annual 1.1 per cent compared to 1.8 per cent in August. Based on about 2,000 interviews, the GfK survey was taken in the build-up to the government's planned and deeply unpopular three percentage point hike in sales tax, which economists believe will dampen economic growth during the first part of next year. Moreover, the institute's latest survey helps to confirm economists' predictions that household spending will jump in the run-up to the increase in the value-added tax as consumers splash out on big-ticket items. Releasing the survey, the GfK said the rise in the October reading was "mainly attributable to consumer propensity to make larger purchases and beat the VAT increase scheduled for next year." "It is precisely because consumers expect that they will have less disposable income available in the future, that they are bringing forward purchases on the grounds of rational reasoning," the Nuremberg-based institute said. The index's component gauging consumers' willingness to spend jumped 6.2 points to 62.3 in September, which is its highest reading in the survey's 15 year history. But while a raft of key economic surveys have pointed to German business leaders and investors growing increasingly wary about the nation's economic prospects, the GfK index measuring consumer's expectations about the economic outlook also rose, gaining one point to 12.4. In particular, both the ifo index measuring business confidence and the ZEW survey of analysts and institutional investors slipped this month on concerns about a slowdown in German economic growth around the start of the new year as the sales tax hits consumer spending and a weaker US economy hits exports. However, the index measuring consumers' expectations about their own incomes declined, dropping 5.0 points to minus 8.8.
