German consumers, shrugging off Ukraine crisis, most upbeat since 2007

BERLIN Mon May 26, 2014 2:00am EDT

BERLIN May 26 (Reuters) - German consumer morale held steady at its strongest level in more than seven years heading into June as shoppers, shrugging off the Ukraine crisis, became more upbeat about the prospects for Europe's largest economy.

GfK market research group said on Monday its forward-looking consumer sentiment indicator, based on a survey of around 2,000 people, was at 8.5 for the fourth consecutive month going into June, its highest level since January 2007.

That was in line with the Reuters consensus forecast.

"The pleasing news this month is without doubt that the economic outlook of German consumers continued to improve in May, despite the Ukraine crisis," GfK analyst Rolf Buerkl said.

Consumers' expectations for the economy rose to their highest level in nearly three years in May after stagnating over the previous three months. Germans likely took hope from reports about further rises in employment and the number of registered jobless being below the 3 million mark, GfK said.

"Events in eastern Ukraine, which reached a preliminary climax with the referendum on regional independence from Ukraine, evidently did not have a lasting impact on the economic mood in Germany recently," Buerkl said.

Earlier this month pro-Moscow rebels declared a resounding victory in a referendum on self-rule for eastern Ukraine.

The GfK survey showed income expectations came off April's post-reunification record high but remained at a high level. GfK said negotiated wages would likely rise by around 3 percent this year and inflation would remain moderate in the coming months, so people's purses will be noticeably fuller.

Annual inflation in Germany stood at 1.3 percent in April and interest rates are also low, discouraging consumers from saving. That, combined with stable job prospects and rising incomes, made Germans more willing to splash their cash in May.

GfK confirmed its forecast that private consumption would increase by around 1.5 percent in real terms this year.

But it warned that the consumer climate could take a knock if Russia is slapped with tougher sanctions that drive up the price of energy noticeably. Such a scenario would likely lead to private households cutting back on spending as they would have to set aside more of their budget for energy, GfK said.

Other surveys in May have shown business morale dropping to its lowest level so far this year and investor sentiment plunging to its weakest level in nearly 1-1/2 years.

For a related table, click on (Reporting by Michelle Martin; Editing by Stephen Brown)

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