May 24, 2018 / 6:09 AM / 6 months ago

German consumer morale declines further heading into June

FILE PHOTO: File photo of shoppers resting with their purchases in downtown Hanover June 19, 2012. REUTERS/Fabian Bimmer/Files

BERLIN, May 24 (Reuters) - German consumer sentiment deteriorated further heading into June to reach the lowest level so far in 2018, a survey showed on Thursday, suggesting that household spending in Europe’s biggest economy could slow in the coming months.

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.

The Nuremberg-based GfK institute said its consumer sentiment indicator, which is based on a survey of around 2,000 Germans, slipped for the second month in a row to 10.7 points going into June from 10.8 in May. That compared with a Reuters consensus forecast for the index to stay unchanged at 10.8.

“Possible risks to the consumer climate are posed first and foremost by the geopolitical situation,” GfK researcher Rolf Buerkl said in a statement.

“More than anything, a negative impact on trade as a result of U.S. sanctions would have a long-term effect on Germany as an export nation,” Buerkl said.

Income expectations edged up to 54.2 points while economic expectations remained stable, the survey showed. But willingness to buy fell 4.1 points to a year-low at 55.9 points.

“Despite this fall, the propensity to buy is still at a very high level,” Buerkl said, adding that high employment, job security and rising incomes ensured German citizens to open their wallets for consumer spending.

The GfK survey was conducted from April 27 to May 14, as President Donald Trump announced the United States’ withdrawal from a 2015 international agreement designed to deny Iran the ability to build nuclear weapons, rising political uncertainty.

But Buerkl said the U.S. unilateral termination of the deal didn’t have a particular negative effect on consumers’ mood.

Reporting by Riham Alkousaa; Editing by Toby Chopra

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