German consumer confidence is set to deteriorate in July as the economy struggles to gain momentum, a closely watched survey showed on Wednesday.
After rising for four straight months, the consumer climate index dropped unexpectedly to -21.8 in July from -21.0 in June, the survey published jointly by GfK and the Nuremberg Institute for Market Decisions showed. The score was forecast to climb to -19.4.
In June, income and economic expectations suffered moderate losses, and the propensity to buy dropped slightly and continued to stagnate at a very low level. On the other hand, the propensity to save indicator rose 3.2 points to 8.2 in June.
The income expectations index slid 4.3 points to 8.2. The main reason for the fall was the rise in inflation. In May, inflation rose to 2.4 percent and moved further away from the European Central Bank\'s target of around 2 percent.
As hopes for a rapid economic recovery darkened, the economic expectations index declined 7.3 points to 2.5 in June.
The propensity to buy indicator remained at an extremely low level for more than two years. At -13, the index lost 0.7 points from May. Consumers were reluctant to buy largely due to rising prices.
The interruption to the recent upward trend in consumer sentiment indicates that the road out of the consumer slump will be difficult and that setbacks can occur again and again, consumer expert at NIM Rolf Burkl said.
Higher inflation is causing more uncertainty among consumers, Burkl noted.
ING economist Carsten Brzeski said not even the European Football Championships can improve consumer confidence. The survey emphasizes the ongoing struggle of the entire economy to gain more positive momentum, Brzeski added.