German consumer morale falls slightly heading into October

[BERLIN] The mood among German consumers worsened slightly heading into October but remains at one of the highest levels in more than a decade, a survey showed on Wednesday, suggesting that private consumption is likely to compensate for weakening exports.

The consumer sentiment indicator, published by the Nuremberg-based GfK institute and based on a survey of around 2,000 Germans, fell to 10.0 going into October. A Reuters poll had expected unchanged at 10.2.

Record-high employment, rising real wages and ultra-low borrowing costs are boosting the spending power of Germans.

GfK said the slight fall was linked to a prevailing sense of uncertainty linked to the threat of possible attacks in Germany and the economic consequences of Britain's vote in June to leave the European Union.

"The consequences of this (Brexit) for the European and, above all, German economy are still completely unclear," GfK researcher Rolf Buerkl said.

"Nevertheless, GfK confirms its forecast that a rise in real private consumer spending of around two per cent in 2016 appears achievable and realistic," he added.

"Consumption therefore remains an important pillar of economic growth in Germany."

A sub-index measuring economic expectations fell for the third time in a row, suggesting German consumers fear the economy will be weaker over the next few months.

Data and sentiment surveys published over the summer have painted a mixed picture of Europe's largest economy.

Industrial production fell the most in 23 months in July while exports unexpectedly posted their steepest drop in nearly a year, adding to evidence that manufacturing is losing momentum as overseas demand, particularly from Asia, wanes.

German business morale hit a 28-month high this month after deteriorating sharply in August on Brexit fears.

"It appears that consumers feel the German economy will develop somewhat more moderately in the coming months," Mr Buerkl said.

The GfK survey also showed that consumers' income expectations and willingness to buy remained solid at above 50.0 points, despite falling from last month.

The robust German labour market has resulted in collective wage increases, which coupled with record-low interest rates, continue to encourage traditionally frugal Germans to spend.

REUTERS

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