BERLIN (Reuters) - German consumer morale fell heading into July as the slowdown weighing on Europe’s largest economy darkened income expectations among shoppers, a survey showed on Wednesday.
The GfK consumer sentiment indicator, based on a survey of about 2,000 Germans, fell for the second time in a row to 9.8 from 10.1 a month earlier. Economists polled by Reuters had expected a reading of 10.0.
Household spending has become a key source of growth in Europe’s biggest economy as record-high employment, above-inflation pay hikes and low borrowing costs boost domestic demand.
The economy has been facing headwinds from trade conflicts, Brexit uncertainties and a cooling world economy, which are hurting Germany’s export-oriented manufacturers.
There are fears the slowdown in manufacturing could spill into the services sector and dent the robust labour market.
The GfK survey showed that consumer confidence has been shaken, mainly as a result of concerns that German carmakers, which are grappling with trade frictions and a shift toward electric vehicles, could cut thousands of jobs.
“So far, the income indicator has been able to benefit from the excellent development of the job market in Germany. But now the voices heralding the end of the employment boom are growing,” said Rolf Buerkl, a researcher for GfK.
A sub-index measuring income expectations fell to its lowest level since March 2017.
Still, consumers’ propensity to spend rose as shoppers seemed unperturbed by growing doubts about job security.
“Whether this will remain the case depends heavily on how income prospects develop in the coming months,” GfK said. “If the significant loss suffered by this indicator in June turns into a persistent downward trend, it will also be tough for propensity to buy to maintain its currently excellent level.”
The GfK survey was conducted from May 31 to June 14.
July 19 June 19 July 18
Consumer climate 9.8 10.1 10.5
Consumer climate components June 19 May 19 June 18
- willingness to buy 53.7 50.5 55.1
- income expectations 45.5 57.7 57.4
- business cycle expectations 2.4 1.7 19.4
NOTE - 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. ((FOR BACKGROUND AND HISTORICAL DATA, DOUBLE-CLICK ON ))
Reporting by Riham Alkousaa; Editing by Joseph Nasr