* Morale rises to 5.8 from 5.7 (vs f'cast for drop to 5.6
* GfK says Germans see incomes rising, more willing to buy
* But expectations for economy drop to 6-month low
By Sarah Marsh
BERLIN, June 26 Consumer morale in Germany
unexpectedly edged up going into July on improving income
expectations, but worries over the euro zone crisis risk hurting
consumption in the months ahead, a survey by GfK market research
group showed on Tuesday.
Other recent data has suggested Europe's biggest economy is
losing stamina as austerity measures and worries over the crisis
hit investment and exports.
The forward-looking consumer sentiment indicator, however,
rose to 5.8 heading into July from 5.7 in June, bolstered by a
jump in income expectations to 40.1 from 32.0. The reading
bucked expectations in a Reuters poll of 24 economists for a
drop to 5.6.
But consumers were more pessimistic about the outlook for
the German economy, with an expectations reading dropping 16.6
points to 3.0 in June, the lowest since December 2011.
"Clearly, consumers increasingly fear that Germany will also
be dragged more into the downwards spiral (of the euro zone),"
GfK said in a statement. "So far, however, citizens see the
dangers from abroad exclusively for the economy in general and
less for their own personal situation."
"They are considerably more positive about the development
of their own financial situation than in the previous month. As
a result the willingness to buy rose once again from an already
Germany has enjoyed strong economic growth throughout much
of the sovereign debt crisis, outpacing its peers. In the first
quarter of 2012 the economy grew by 0.5 percent, shaking off
recession fears after it shrank 0.2 percent at the end of 2011.
Private consumption was one of the key factors driving
growth and is set to rise around 1 percent in real terms in the
full year, GfK said, confirming its previous forecast.
"Increasing employment numbers as well as better wage deals
in comparison to previous years are allowing expectations for
further income development to rise," GfK.
"On top of that, inflation pressure has eased recently ...
Consumers see their purchasing power strengthened by this."
Germany's unemployment rate eased to 6.7 percent in May from
6.8 percent a month earlier and is seen staying steady this
month, according to a Reuters poll of economists.
Data due out on Wednesday is expected to show German
consumer prices dropping further below the 2 percent threshold
for price stability to 1.8 percent this month.
Expectations of a higher income combined with a lack of
faith in financial markets and low interest rates are prompting
Germans to consumer more rather than save, GfK said.
EURO ZONE RISK
However, GfK warned this could change if rising uncertainty
over the euro zone crisis fed through to consumer morale.
"The increasing uncertainty due to the worsening of the euro
crisis, intense discussions about a possible exit of Greece from
the common currency bloc, as well as the crisis of the Spanish
banking sector could impact the German consumer more and more
going forward," the research group said.
Other recent data has indicated Germany's economy is
The closely watched Ifo survey last Friday showed business
sentiment fell for a second straight month in June to its lowest
level in over two years.
Meanwhile a purchasing managers' survey showed the private
sector shrank for the second month running in June, with
manufacturing activity hitting a three-year low.
But retail sales data due this week are expected to show
turnover remaining unchanged in May after rising more than
expected in April.