Consumer morale in Germany unexpectedly edged up going into July on improving income expectations, but worries over the euro zone crisis risk hurting consumption in the months ahead, a survey by GfK market research group showed today.

Recent data has suggested Europe's biggest economy is losing stamina as austerity measures and worries over the crisis hit investment and exports.

The forward-looking consumer sentiment indicator, however, rose to 5.8 heading into July from 5.7 in June, bolstered by a jump in income expectations to 40.1 from 32.0. But consumers were more pessimistic about the outlook for the German economy, with an expectations reading dropping 16.6 points to 3.0 in June, the lowest since December 2011.

"Clearly, consumers increasingly fear that Germany will also be dragged more into the downwards spiral (of the euro zone)," GfK said in a statement. "So far, however, citizens see the dangers from abroad exclusively for the economy in general and less for their own personal situation.

"They are considerably more positive about the development of their own financial situation than in the previous month. As a result the willingness to buy rose once again from an already high level."

Germany has enjoyed strong economic growth throughout much of the sovereign debt crisis, outpacing its peers. In the first quarter of 2012 the economy grew by 0.5 per cent, shaking off recession fears after it shrank 0.2 per cent at the end of 2011.

Private consumption was one of the key factors driving growth and is set to rise around 1 per cent in real terms in the full year, GfK said, confirming its previous forecast.

"Increasing employment numbers as well as better wage deals in comparison to previous years are allowing expectations for further income development to rise," GfK said.

Reuters