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UPDATE 1-German consumer morale seen steady in Feb - GfK

Published 01/28/2009, 02:47 AM
Updated 01/28/2009, 02:48 AM

(Adds economist comment, Gfk quotes)

By Brian Rohan

BERLIN, Jan 28 (Reuters) - German consumer morale should hold steady in February as lower energy costs buoy households' readiness to buy despite growing concerns about the economic outlook, the GfK market research group said on Wednesday.

GfK's forward-looking gauge of sentiment, based on a survey of 2,000 Germans, was unchanged at 2.2 for February as the January figure was revised up to 2.2. A Reuters poll of analysts had forecast a reading of 2.0.

The GfK indicator's willingness to buy component jumped to 15.5 in January from -6.3 in December. The component readings lag the headline number by a month.

"The strong rise in consumers' readiness to buy is mainly due to us having a very low inflation rate at the moment," said Rolf Buerkl, senior research consultant at GfK.

"But on the other hand, income expectations show that consumers' fear... of unemployment has grown, making them more pessimistic about the future," he told Reuters Television.

Germany's headline annual inflation rate slowed to 1.1 percent last month from 1.4 percent in November and is expected to hold steady in January as oil hovers at prices close to one third of last summer's $147 per barrel high point.

Retailer Arcandor earlier this month posted a slight rise in sales at its retail segments in the Christmas quarter and said it was cautiously optimistic for the future.

Germans' shopping habits are key to the economy's performance as consumer spending accounts for over half of gross domestic product (GDP). The government has looked to boost domestic demand to offset weaker exports.

Despite twin stimulus measures it says are worth about 80 billion euros ($105.6 billion), Berlin is expecting GDP to contract by 2.25 percent this year as global growth sputters.

"The average consumer can't seem to decide whether the stimulus package is positive or perhaps not," said Andreas Rees, economist at Unicredit. "Consumers are being pulled back and forth: Relief at cuts in taxes and non-wage costs are offset by fears about rising unemployment."

Consumers surveyed by GfK also voiced concern. Weighing the overall indicator down was a component on business cycle expectations, which fell to -32.9 from -32.4 in December.

Another component on income expectations fell to -20.5 from -15.4 the previous month, also adding counterweight to consumers' upbeat assessment toward making purchases.

"Reports of shortened working hours, forced vacation, and imminent dismissal ... have increased employees' fear of joblessness, and income expectations have fallen heavily for the second time in a row," GfK said. (Reporting by Brian Rohan; Editing by David Stamp)

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