June 28, 2018 / 6:04 AM / 6 months ago

German consumer sentiment remains unchanged headed into July

BERLIN (Reuters) - German consumer sentiment remained unchanged heading into July, the market research group GfK said on Thursday, as fears that a trade conflict between Europe and the United States cloud the outlook for Europe’s largest economy.

Private consumption has become the main source of economic expansion in Germany in recent years, supported by record-high employment, increased job security, above-inflation pay hikes and low borrowing costs.

Nuremberg-based GfK said its consumer sentiment index, which is based on a survey of around 2,000 Germans, held at 10.7 points after declining the previous two months. Analysts polled by Reuters had forecast the index would slip to 10.6.

“The trade conflict between the EU and the U.S. is intensifying and leaves a clear mark on the consumer mood in Germany,” Rolf Buerkl, a researcher for GfK, said in a statement.

Economic expectations dropped 14.1 points to 23.3 points, the lowest in more than a year.

U.S. President Donald Trump is threatening to impose hefty tariffs on car imports from Europe - a trade that Germany dominates - on top of earlier unilateral duties on metals.

Business leaders are worried that a similar trade confrontation between Washington and Beijing could harm German exporters who rely on the world’s two largest economies for growth.

“The route taken by the U.S. president in terms of the trade policy towards the EU is causing concern, especially where economic expectations are concerned,” Buerkl said.

But the subindex measuring consumer propensity to buy edged up to 56.3 points. A subindex measuring income expectations also rose, to 57.6 points, propelled by a stable job market and strong demand for workers.

“The ongoing excellent employment prospects are apparently outweighing the current negative global economic influences on the indicator,” Buerkl said. “However, the consumer economy in Germany remains intact, even if it is slightly less dynamic.”

Reporting by Riham Alkoussa, editing by Larry King

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