Survey: German Consumer Confidence Falls

German consumer confidence has fallen back from recent highs as shoppers in Europe's biggest economy worry about the impact of an imminent increase in value-added tax, a survey showed Friday.

The GfK research group said its forward-looking consumer climate indicator for January fell to 8.7 points from 9.2 in December -- the latter figure revised down from an initial estimate of 9.4. Economists surveyed by Dow Jones Newswires had expected a January reading of 9.5.

VAT paid by consumers will increase to 19% from 16% on Jan. 1, a move aimed largely at curbing Germany's budget deficit. GfK said that weighed on Germans' income expectations.

"Consumers obviously perceive the imminent rise in VAT as a huge burden on their purchasing power," GfK said in a statement. "This situation is exacerbated by higher health care and pension contributions as well as the abolition of tax benefits."

However, the survey found that Germans' view of the country's economic prospects is at its most optimistic in six years. A section of the index measuring the outlook for the German economy rose by 25.4 points from November to December, to 35.7 -- its highest level since January 2001.

This year brought an upturn after years of stagnation, and unemployment is at a four-year low. Officials and economists are increasingly confident that the upswing will weather the VAT raise.

"Improved economic sentiment coupled with better employment figures and renewed prospects of higher wage and salary increases are giving rise to hopes that income expectations will be able to recover during the course of 2007 after the tax shock at the beginning of the year," GfK said.

Consumers apparently have been buying to beat the VAT increase. A subindex measuring their propensity to make major purchases slipped by four points in December, but remained healthy at 59.9 points.

The GfK group's survey is based on around 2,000 interviews with consumers each month, conducted on behalf of the European Commission.