German consumer morale steadies going into August

[BERLIN] Morale among German consumers steadied going into August, with higher income expectations offset by concerns that a deal to keep Greece in the euro zone will weigh on Germany's economy, market research group GfK said on Wednesday.

The GfK consumer sentiment indicator, based on a survey of 2,000 Germans, was unchanged at 10.1 points heading into August, in line with the consensus forecast in a Reuters poll. A month earlier, the indicator fell for the first time since October.

"German consumers apparently assume that the hard-won solution in the debt dispute with Greece will have negative consequences on the German economy," said GfK analyst Rolf Buerkl.

The consumer angst about Greece contrasted with the sentiment in corporate Germany, with business confidence rising in July as an agreement between Greece and its creditors for talks on a third bailout lifted the mood at German firms.

The GfK indicator showed German households were more upbeat about their income expectations than a month earlier, reflecting stable domestic conditions.

German economic growth weakened to 0.3 per cent at the start of this year and the finance ministry said last week that the economy would probably expand by around the same amount between April and June, with domestic demand propelling growth while foreign trade resurged.

The GfK survey showed Germans felt more optimistic about their future income than at any point since Germany reunified in 1990, thanks to high employment and strong pay hikes.

"In real terms, the healthy growth in income ultimately means that people also have more money in their pockets since the inflation rate continues to be low," Mr Buerkl said.

Shoppers nonetheless felt less willing to make purchases, which GfK said could be due to waning optimism about the overall economic outlook.

REUTERS