Morale among German consumers fell for the second month in a row heading into October, as global economic risks and uncertainty about the handling of the refugee crisis weighed on sentiment.

The GfK consumer sentiment indicator, based on a survey of 2,000 Germans, fell to 9.6 heading into October, from 9.9 a month ago - the lowest reading since 9.3 in February.

The reading also fell short of the Reuters consensus forecast of 9.8.

Economic concerns among German consumers increased significantly with the sub-index for economic expectations declining by a sharp 10.2 points to its lowest rate since November last year.

"This certainly has little to do with general domestic conditions, which remain very good in regard to employment, income and inflation. Rather, it is due to the fact that international conditions have recently become much more turbulent," GfK analyst Rolf Buerkl said.

The weaker economic outlook and a slowdown in the labour market had a negative effect on German consumers’ income expectations and their willingness to buy, with both sub-indices declining to their lowest rate this year.

Nevertheless, the figures are still at an overall high level and well above last year’s readings.

Buerkl particularly points out effects on consumer morale of the growing number of refugees entering Germany, which expects at least 800,000 arrivals this year alone. A continued influx in this order of magnitude will likely continue to affect consumer morale negatively and increase pressure on the labour market, GfK said.

“Whether the downward trend will continue will likely depend on how policymakers deal with international crises in the coming weeks and months, primarily the influx of refugees to Germany,” Mr Buerkl said.

Reuters