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German GfK consumer morale edges down heading into July

German GfK consumer morale edges down heading into July
FILE PHOTO: People walk on a shopping street in the southern German town of Konstanz January 17, 2015. REUTERS/Arnd Wiegmann -
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Arnd Wiegmann(Reuters)
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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.”

(Reporting by Riham Alkousaa; Editing by Joseph Nasr)

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