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Business

German consumers grow wary of Greek crisis

Uncertainty over the Greek debt crisis has begun to weigh on German consumer sentiment, a monthly survey by GfK research group showed. A relevant indicator dropped for the first time since October.

The GfK market research group reported Thursday that its forward-looking Consumer Climate Index slipped for the month of July, falling 0.1 points to 10.1 points - its first drop since October 2014.

GfK attributed the decline to "unsuccessful efforts" to resolve the Greek debt crisis which appeared to be "dampening the economic outlook for consumers."

"The battle to resolve the Greek debt crisis is escalating and it is looking ever more likely that the country will default," GfK warned in its survey for July. "That could cause the economic motor to start stuttering," GfK warned in its survey for July.

Consumer spending has become a central pillar of the recent upswing in Europe's largest economy as Germans have enjoyed rising income with declining unemployment.

Uncertainty over the outcome of the Greek debt crisis, however, appears to be increasingly weighing on their willingness to continue spending. GfK's sub-index gauging consumers' propensity to spend dropped 5.6 points to 57 points, showing a "slight downward trend," but remaining at a "very high" level.

Analysts had predicted the GfK index to remain stable in July. The reported decline, however, is too small to raise concern about consumer spending they now say.

Ulrike Kastens, analysts with Sal Oppenheim, said fundamental conditions for strong consumer spending hadn't changed.

"Low interest rates, rising income expectations and a stable labor market will continue to boost consumption and contribute to higher growth," Oppenheim told the news agency Reuters.

And Stefan Kipar from the Bavarian regional lender BayernLB told the same news agency that he expected Germans to remain in buoyant spending mood throughout the summer.

Nevertheless, the outlook for the German economy, indeed, appears to be clouding over, with further proof provided by Ifo Institute's business climate index published on Wednesday (24.07.2015). The important barometer in June fell for the second straight month, slumping to its lowest level since February amid fears of a Greek default and the country's exit from the eurozone.

uhe/cjc (Reuters, AFP, dpa)

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