German consumer confidence set to fall in September, GfK says

Sentiment among German consumers is set to ease marginally heading into September after reaching a six year-high in August, with households expecting the economic recovery to be sluggish in the coming months, a survey by market research group GfK revealed Wednesday.

The forward-looking consumer confidence indicator for September slipped to 6.9 from a six year high of 7 in August. The outcome defied expectations for an increase in the indicator to 7.1.

"The upward trend of the consumer climate since February 2013 has therefore come to an end for the time being," the GfK said in the survey report." However, it cannot yet be assumed that this is a trend reversal and the start of a downturn."

The economic expectations of German consumers slipped for the first time in four months in August, with the corresponding indicator falling to 1.8 from 4.3 in July.

"Consumers clearly feel that though the German economy is improving, recovery is likely to be rather slow over the coming months," the report said.

The income expectations index declined for the first time in five months in August and now stands at 37.2, down from June's two-year high reading of 42.8.

The slightly less optimistic economic outlook of consumers and increased price expectations could be possible reasons for this decline. Also, they fear that their purchasing power will come under pressure and are taking a slightly more restrained view of their income prospects, GfK said.

In contrast, German companies are currently in a more optimistic mood, as evidenced by the fourth successive increase in the Ifo business climate index to reach a 16-month high in August.

The GfK, nevertheless, noted that despite the decline, the indicator remained at a very high level. This can be attributed to extremely stable employment situation, which is allowing greater scope for collective bargaining agreements.

Meanwhile, the indicator reflecting consumers' willingness to buy increased to 44.4 in August, the highest level since December 2006, from 40.7 in July. The consumer climate index edged up to 7 from 6.8 in July.

"In light of extremely low interest rate levels and the recent slight rise in the rate of inflation, the appeal for consumers to invest their money in major purchases has increased further still," GfK said in the report.

The economy expanded 0.7 percent quarter-on-quarter in the second quarter of 2013, according to the Federal Statistical Office.

The Bundesbank said Monday that Germany's economic growth will likely return to normal and steady rates in the second half of 2013. The central bank forecasts 0.3 percent growth for the economy this year.