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German consumers upbeat

June 29, 2016

Market research group GfK has said German consumers are defying rainy weather this summer and uncertainty surrounding the UK's exit from the EU as they will continue to spend on expectations of rising incomes.

Konsumklima in Deutschland verbessert sich
Image: picture alliance/dpa

German consumer morale had reached its highest level in nearly a year, GfK said in its monthly survey released Wednesday, keeping Europe's biggest economy on a sustained path of growth this year.

GfK's consumer sentiment index - based on a survey of some 2,000 German households - rose to 10.1 going into July, from 9.8 a month earlier. The last time the index reached that level was in August 2015.

"In contrast to the weather, German consumer sentiment is showing itself from its sunny side," GfK said in a statement, and added: "The favorable consumer climate is being driven mainly by the excellent domestic economic conditions, such as the high level of employment, very good income developments and the near absence of inflation."

Expectations rising, but risks remain

German's expectations about developments in the country's economy rose for the third consecutive month, jumping from 8.3 points in June to 18 points for July.

As the German economy was growing a robust 0.7 percent at the beginning of the year, consumers here have also grown more upbeat about their earnings, with the index for income expectations rising almost eight points to 59.6 - the highest level on record.

Consumers' willingness to buy high-priced goods such as cars and furniture, however, deteriorated slightly to 54.4 after it reached its highest level in a year the previous month.

Also, the survey was conducted between May 27 and June 10, meaning that the results do not incorporate the outcome of Britain's vote on June 23 to leave the European Union.

Rolf Bürkl, a senior researcher for the Nuremberg-based group, noted that German consumers "spirits are as of yet undampened" by the fallout of the UK leaving the EU. "However, it is expected that the current uncertainty in the financial markets will also be felt by German consumers," he added.

The risk was, GfK warned, that longer-term volatility on stock markets as well as political uncertainty within the EU and Germany could damage sentiment among German consumers.

uhe/kd (AFP, dpa, Reuters)

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