German consumer morale inches higher heading into June – Reuters

BERLIN May 25 German consumer morale improved slightly heading into June as shoppers remained upbeat, a survey showed on Wednesday, signalling that private consumption continues to drive growth in Europe’s largest economy.

The spending power of Germans has been boosted by record-high employment, rising real wages and ultra-low borrowing costs.

The GfK consumer sentiment indicator, based on a survey of around 2,000 Germans, rose to 9.8 heading into June from 9.7 a month earlier, reaching its highest level since September 2015 and beating a Reuters consensus forecast of economists.

“Consumers still believe that the German economy will continue to grow moderately over the next few months,” said Rolf Buerkl, a researcher for Nuremberg-based GfK. The survey found that expectations for the economy rose two points to 8.3.

Consumers were less upbeat about their earnings for the next year, with the index for income expectations falling almost six points to 51.8. It was the lowest level since March this year.

The drop in earnings expectations is a possible reflection of disappointment with wage rises sealed this month by German unions for more than six million employees that analysts said were not as generous as deals reached last year.

Buerkl said despite the fall, the index remains in “excellent shape” with a reading above 50 points, adding that expectations that inflation will remain low this year mean the wage rises will leave employees with more money to spend.

The willingness to buy improved by more than two points to 57.7, its highest level in 12 months.

“Consumers are still very willing to make purchases,” said Buerkl. “The indicator has presumably benefited from the debate surrounding negative interest rates, which has been sparked yet again by the monetary policy of the European Central Bank.”

The German economy expanded by 1.7 percent in 2015, its strongest rate in four years, driven by robust private consumption and higher state spending on refugees. It is expected to grow by around the same amount this year. (Reporting by Joseph Nasr Editing by Jeremy Gaunt)