2018.07.2608:17:00UTC+00German Consumer Confidence To Drop On Trade War Fears

Germany's consumer confidence is set to drop in August as economic expectations continued to weaken on trade war fears, survey data from the market research group GfK showed Thursday.

The forward-looking consumer sentiment index fell to 10.6 in August, while it was forecast to remain unchanged at 10.7.

The survey showed that income expectations and propensity to buy were able to maintain their extremely good level while economic expectations continue their clear downwards trend in July.

The economic expectation indicator dropped 7.6 points to 15.7 in July. The escalating trade conflict between the EU and the United States adversely affected German consumers' economic expectations.

According to GfK, consumers assess that the international crisis will cause the German economy to slowdown as escalating trade conflict with the U.S. may have a negative impact on Germany and other trading partners.

GfK said the largest euro area economy will shift down a gear in 2018. Meanwhile, the survey showed that the income expectations indicator dropped only marginally by 0.1 points to 57.5 points in July.

The labor market continues to boom with a steady growth in the employment rate. The positive wage trend is also ensuring that even pensions are showing considerable growth, GfK noted.

Similarly, the indicator for propensity to buy fell slightly to 56.2 from 56.3 in the previous month. Despite the uncertain times in terms of world politics, German citizens were keen to keep on buying, the agency said.

The labor market stability boosted confidence of German citizens to enter into financial commitments. Moreover, the interest rate remained low.

Overall, the prospects for a good consumer year in 2018 are still present. GfK confirmed its prognosis that real private consumer spending will rise in Germany by around 1.5 percent this year.

Data released on Wednesday showed that German business sentiment weakened for the second straight month in July. Companies were slightly more satisfied with their current business situation, but scaled back their business expectations modestly citing trade concerns.