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German consumer morale highest in 8 years heading into Jan: GfK

German retail sales dipped in December, marking a weak end to the year and suggesting private consumption, which has been a pillar of support for Europe's largest economy, could lose steam in the fourth quarter.

[BERLIN] German consumer sentiment hit its highest level in eight years heading into January as shoppers expect Europe's largest economy to gain momentum, a survey showed on Friday.

Market research group GfK said its forward-looking consumer sentiment indicator, based on a survey of around 2,000 Germans, rose to 9.0 going into January from 8.7 in December.

It was the highest reading since December 2006 and beat the Reuters consensus forecast for a reading of 8.8. "Evidently consumers currently assume that the phase of economic weakness in Germany will be temporary and are expecting their domestic economy to return to growth over the coming months," GfK said in a statement.

But it added that crises in Ukraine, Syria and Iraq and the Ebola outbreak continued to weaken the economy.

Shoppers became more willing to buy as falling energy prices drove down the cost of heating oil and petrol, leaving households with more money to spend on other items.

People's propensity to save fell to its lowest level since 1991, when GfK started collecting data for the newly reunified Germany.

On the downside, consumers' income expectations fell, with GfK attributing this to the delicate international situation.

Domestic conditions remain favourable for consumption though, with employment at a record high, wages rising and inflation moderate.

The consumer climate indicator forecasts the development of real private consumption in the following month.

An indicator reading above zero signals year-on-year growth in private consumption. A value below zero indicates a drop in comparison with the same period a year ago.

According to GfK, a one-point change in the indicator corresponds to a year-on-year change of 0.1 percent in private consumption.

The "willingness to buy" indicator represents the balance between positive and negative responses to the question: "Do you think now is a good time to buy major items?" The income expectations sub-index reflects expectations about the development of household finances in the coming 12 months.

The additional business cycle expectations index reflects the assessment of those questioned of the general economic situation in the next 12 months.