Inflation fears take shine off German consumer morale

Market research firm GfK's forward-looking German consumer confidence reading for April slipped to 9.8 points after 10.0 this month, slightly short of analysts' expectations

Consumers in Germany are more confident about the economy and keen to spend money, but concerned about the impact of inflation on their incomes, a closely-watched survey showed Thursday.

Market research firm GfK's forward-looking consumer confidence reading for April slipped to 9.8 points after 10.0 this month, slightly short of analysts' expectations, it said in a statement.

"Increased inflation in Germany and stronger fears about purchasing power apparently prevented a broader-based recovery," GfK commented.

Looking in more detail, the pollsters found that people expected the current strength of Europe's largest economy to continue.

Good news keeps coming in for Germany even as it battles uncertainty on a number of fronts, including upcoming elections at home and in neighbouring France, US President Donald Trump's tough talk on Berlin's trade surplus, and Brexit.

On Monday, the Council of Economic Experts that advises the federal government upgraded its economic forecasts slightly, predicting 1.4 percent growth in 2017 after 1.9 percent last year.

A confident outlook for the future has boosted consumers' readiness to splash out, a GfK sub-index measuring the public's inclination to buy showed.

Record low unemployment means people expect to remain in work, with a steady income on hand to cover big purchases.

Nevertheless, rising energy prices have eaten into consumers' spending power, dampening expectations with regard to disposable income and persuading households to set more aside in savings.

Inflation in Germany hit 2.2 percent in February, its highest level since August 2012.

Monetary policymakers have blamed the pick-up on rising food and energy prices, but predicted that inflation would slow again later in the year.

The "slightly weak phase in consumer confidence (in recent months) will come to an end when inflation falls back," GfK predicted.

"Private consumption will remain an important pillar of overall economic development" in Germany in 2017, the pollsters concluded.