1ST LEAD German pay packets rise at fastest pace in three years By Andrew McCathie, dpa

Berlin (dpa) - German pay packets rose at their fastest pace in three years in 2017 and are forecast to increase further in 2018 as a result boosting the outlook for private consumption and helping to power economic growth.Pay agreements resulted in employee salaries posting their sixth consecutive annual gain in 2017, rising on average by 2.3 per cent compared to 2016 and significantly higher than the 1.7-per-cent inflation, the Federal Statistics Office (Destatis) said on Thursday.Wages were up 2 per cent in 2016, the Wiesbaden-based Destatis said with private consumption having emerged as a key force behind the current robust growth rate in Europelsquo;s biggest economy.In their latest economic projections published in September, the nationlsquo;s leading economic institutions said they expected real incomes to rise by 1.8 per cent in 2018."Most consumers will probably have more money in their wallet," said Roland Doehrn, economist with the Essen-based institute for economic research (RWI). "The income trend remains favourable," he said.About 21 million German pensioners are also expecting a rise of about 3 per cent in the coming year, according to the German pension insurance authority.The increase in wages have also raised the optimism among retailers about sales during the crucial Christmas period.The German Federation of Retailers (HDE) is expecting Christmas sales to grow by about 3 per cent to 94.5 billion euros this year compared with 2016.The 2017 increase in wages represented the biggest gain since 2014 when they surged by 3.2 per cent.With extra benefits and bonuses, wage rates rose 2.8 per cent this year compared with 2016, Destatis said.Nuremberg-based market research institute (GfK) said it expects private consumption to grow by at least 1.5 per cent this year with higher wages, a solid jobs market, record low interest rates and subdued inflation helping to power ahead household spending.Germanylsquo;s unemployment rate will drop to 5.5 per cent in 2018 and to 5.2 per cent in 2019 after falling to 5.7 per cent this year, according to the economic instituteslsquo; September forecasts.