July 25, 2014 / 6:17 AM / 3 years ago

German consumer morale at highest level in more than 7.5 years

BERLIN (Reuters) - German consumer morale rose to its highest level in more than 7-1/2 years heading into August as shoppers became more upbeat about their future income prospects than at any point since 1991, a survey showed on Friday.

Market research group GfK said its forward-looking consumer sentiment indicator, based on a survey of around 2,000 people, climbed to 9.0 going into August from 8.9 in July.

That was the strongest reading since December 2006 and was higher than the Reuters consensus forecast for 8.9 - a positive sign for domestic demand, on which the government is relying to drive growth this year as exports are seen remaining weak.

“Despite the escalation in the situations in Israel and Ukraine, German consumers continue to be exceedingly optimistic this summer,” GfK analyst Rolf Buerkl said.

He said the downing of a Malaysia Airlines plane over Ukraine last week had not been factored into the survey, which was almost complete at the time of the crash, but said this, along with the Gaza crisis, could start to hurt consumers’ mood.

Germans’ income expectations have risen to their highest level since 1991, when Gfk started collecting data for the newly reunified country.

Germans are benefiting from a stable labor market, rising wages and moderate inflation, and GfK said retirees could also expect a real increase in income this year.

Consumers’ expectations for German economic growth took a slight dip due to the crises in the Middle East and eastern Ukraine, but remained at a high level overall.

Shoppers became less willing to purchase as the effects of the European Central Bank’s June rate cut, which had discouraged Germans from saving, started to wear off.

Other recent indicators have shown industrial production, orders, exports and monthly retail sales falling while investor morale has also weakened.

Reporting by Anja Nilsson; Editing by Michelle Martin and Gareth Jones

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