December 22, 2017 / 7:02 AM / a year ago

Mood among German consumers brightens going into the new year - GfK

BERLIN, Dec 22 (Reuters) - German consumers felt more optimistic heading into January, unperturbed by its political parties’ failure to form a new government for Europe’s largest economy three months after an election, a survey showed on Friday.

GfK market research group’s consumer sentiment indicator, based on a survey of 2,000 Germans, rose to 10.8 going into January from 10.7 the previous month, matching the Reuters forecast.

Cheerful shoppers foresaw their incomes rising and the economy continuing to fire on all cylinders in early 2018. While their willingness to buy dropped slightly, it remained at a high level overall, with a stable job market giving people the confidence to purchase big ticket items.

“Consumers in Germany still appear to be in high spirits at the end of 2017,” said GfK researcher Rolf Buerkl, adding that domestic economic activity would keep propping up growth.

The economy was traditionally propelled by exports, but household spending has become a key growth driver in recent years as consumers enjoy record-high employment, job security, rising wages and low borrowing costs.

The GfK survey points to that trend continuing in early 2018 even though the country has been run by a caretaker government since a Sept. 24 election and most experts do not expect a new administration to be formed before March.

Chancellor Angela Merkel is hoping the Social Democrats will agree to a re-run of the current “grand coalition” with her conservatives after her attempt to form a “Jamaica” alliance with the liberal Free Democrats and Greens ended in failure.

“The current trend also indicates that the failed attempts to form a ‘Jamaica’ coalition in November did not have a negative effect on consumer mood,” Buerkl said.

He added that risks for morale among shoppers included slow progress in talks on Britain’s looming departure from the European Union, tensions with North Korea and future trading relations with the United States due to possible protectionist policies there.

JAN 18 DEC 17 JAN 17 Consumer climate 10.8 10.7 9.9 Consumer climate components DEC 17 NOV 17 DEC 16 - willingness to buy 57.1 58.5 48.0 - income expectations 54.3 47.9 55.6 - business cycle expectations 45.2 44.3 16.4

NOTE - The consumer climate indicator forecasts the development of real private consumption in the following month.

An indicator reading above zero signals year-on-year growth in private consumption. A value below zero indicates a drop in comparison with the same period a year ago.

According to GfK, a one-point change in the indicator corresponds to a year-on-year change of 0.1 percent in private consumption.

The “willingness to buy” indicator represents the balance between positive and negative responses to the question: “Do you think now is a good time to buy major items?”

The income expectations sub-index reflects expectations about the development of household finances in the coming 12 months.

The additional business cycle expectations index reflects the assessment of those questioned of the general economic situation in the next 12 months. (Reporting by Michelle Martin; Editing by Hugh Lawson)

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