- GfK research institute
German consumer morale reached the highest level in almost six years heading into August on the back of a strong labour market and prospects of more robust economic expansion. According to the GfK research institute, the forward-looking consumer climate index climbed to 7 points for August from 6.8 in July, the highest since September 2007. Along with that, German annual inflation beat expectations, accelerating to the highest level this year, but stayed below the ECB's target. Higher food prices pushed a 1.9% annual increase in the cost of living in July following a 1.8% rise in the previous month. Analysts yet expected inflation to slow to 1.7%.
Elsewhere, in Spain the nation's economy contracted 0.1% in the April-May period form 0.5% fall in the first quarter, in line with the Bank of Spain preliminary estimates, adding to optimism that the Eurozone's fourth largest economy may start to recover from recession in the second half of this year. Economic output has been declining for two years, however, the pace of slowdown eased for a second straight quarter in Q2. On an annual basis, GDP declined 1.7% in the three month to June, slower than the 2% contraction in the previous three months. The IMF forecasts 1.6% contraction for the Spanish economy this year before a possible stagnation in 2014.
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