German consumer mood to improve in Jan - GfK

By Sylvia Westall

BERLIN, Dec 20 (Reuters) - German consumer morale is likely to improve slightly in January, buoyed by the afterglow of Christmas, but households are still worried by the firm euro and financial market turmoil, a survey showed on Thursday.

The GfK market research group's forward-looking sentiment indicator for January, based on a survey of around 2,000 Germans, rose to 4.5 from an upwardly-revised 4.4 for December, when it fell for the fifth consecutive month in a row.

Economists polled by Reuters had forecast a reading of 4.0 for January ECON.DE after an originally-reported 4.3 for December.

"Consumer sentiment could pick up during the December Christmas shopping period and perhaps over-compensate in comparison with the previous month," the GfK said in a statement.

Christmas shopping makes up around a fifth of annual retail sales in Germany and the country's HDE retail association is forecasting flat sales in real terms over the period.

A GfK gauge of consumers' expectations for the economy in December fell to 23.6 from 24.1 in November, the group said. The components lag the headline indicator by one month.

A measure of income expectations fell to -1.7 from 0.0 in November and a gauge of willingness to buy rose to -10.7 from -21.8, the GfK said.

The GfK said that January consumer sentiment was likely to remain at a relatively low level because of underlying fears about the strength of the German economy.

"The strong euro and its effects on the German exports as well as the turbulence in financial markets are seen endangering growth," the statement said.

Germany's retail sector has struggled to grow in recent years thanks to consumers' willingness to save.

The savings rate rose to its highest since the mid-1990s in the first half of this year -- above 10 percent of income -- as households worried about the impact of welfare reforms.

German retailer Arcandor (AROG.DE) reported soaring third-quarter profits on Tuesday, boosted by the contribution from travel firm Thomas Cook but said that sales at its Karstadt shopping stores had fallen by 2.8 percent in the same period.

The HDE expects sales growth of 0.75 percent in real terms in 2008, describing this as "good growth," but has cut its 2007 sales forecast to flat nominal sales due to the effect of rising food and energy prices on consumer spending power.

Price rises for everyday products have hit consumers hard this year and German inflation accelerated to 3.1 percent in November, which Chancellor Angela Merkel has said is a "cause for concern."