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German consumer sentiment set to improve in July

Staff writer |
German consumer sentiment is set to improve next month but uncertainty following the UK's decision to leave the European Union could take its toll, according to GfK.

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Its forward-looking consumer sentiment indicator rose to 10.1 going into July from 9.8, beating expectations for it to remain unchanged.

"Consumer climate is therefore showing a continued upward trend, underpinning consumption's position as an important pillar of Germany's economic development. GfK confirms its forecast that real, private consumer spending would rise by around 2 percent this year," it said.

"The good consumer climate is predominantly thanks to excellent domestic conditions, such as high levels of employment, excellent income development and virtually non-existent inflation."

Still, GfK said it remains to be seen how Brexit will affect Europe and Germany's economies.

"If it causes longer term uncertainty in the markets as well as political uncertainty in both the EU and the individual member states, Germany in particular, this may also have a negative impact on consumer sentiment in Germany."

Meanwhile, the economic expectations sub-index rose 9.7 points to 18, marking the third increase in a row and the highest level since June 2015.

Income expectations were at their highest level since German reunification, with the indicator up 7.8 points to 59.6.

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