German consumer sentiment is set to fall in July due to a decline in economic and income expectations, a GfK institute survey showed on Wednesday.
The institute's consumer sentiment index dropped to -25.4 heading into July from a slightly revised -24.4 in June, below the expectations of analysts polled by Reuters of a reading of -23.0.
"This is the first setback for the indicator after eight consecutive increases.
"Continued high inflation rates are noticeably eroding the purchasing power of households and preventing private consumption from making a positive contribution," Buerkl added.
While the propensity to buy rose slightly, economic and income expectations declined.
The consumer climate indicator forecasts the development of real private consumption in the following month.
An indicator reading above zero signals year-on-year growth in private consumption.
A value below zero indicates a drop compared with the same period a year earlier.
According to GfK, a one-point change in the indicator corresponds to a year-on-year change of 0.1% in private consumption.
'Willingness To Buy'
The "willingness to buy" indicator represents the balance between positive and negative responses to the question: "Do you think now is a good time to buy major items?"
The income expectations sub-index reflects expectations about the development of household finances in the coming 12 months.
The additional business cycle expectations index reflects the assessment of those questioned of the general economic situation in the next 12 months.