The expectation that business activity is set to pick up further despite what is already a good situation points to an extended upswing. And the fact that the business climate in the retail sector is far better than it has been for a long time illustrates the breadth of the upswing. The modest development in consumer demand over the last decade was the main drag on overall economic momentum. This looks better this time round. In 2011 we can expect to see a real increase in retail sales of 2-3% and a 1.5-2% expansion in real private consumption.
Germany: Mood remains upbeat
However, optimism for domestic demand should not be overdone. Most commodity prices, including the oil price, have climbed appreciably in the course of 2010. If this trend were to intensify markedly in 2011, the increases in real household incomes could quickly be eaten into. But that is only a risk. It is more likely that the rise in the cost of living will remain tame at around 1.5%, leaving room for additional consumer demand.