BERLIN (Reuters) - German consumer morale remained at its highest level in more than seven years heading into May but shoppers became more pessimistic about the prospects for Europe's largest economy due to the crisis in Ukraine, a survey showed on Tuesday.
GfK market research group said its forward-looking consumer sentiment indicator, based on a survey of around 2,000 people, was at 8.5 for a third straight month going into May, its highest since January 2007.
The reading was in line with a Reuters forecast.
While consumers were more upbeat about their future income, their economic expectations and willingness to buy weakened.
"Events in Ukraine are clearly starting to have an impact. Germans appear to be slightly unsettled with regard to the further development of the domestic economy for the first time," GfK analyst Rolf Buerkl said.
"The annexation of Crimea by Russia and the escalation of tensions in eastern Ukraine have caused some consumers to fear that the notable economic recovery could be weakened."
The downturn in consumers' expectations for the economy contrasts with the mood among German companies, which improved in April. But other data shows German exports to Russia dropped by 16 percent in the first two months of the year even before the start of sanctions against Russia due to its stance on Ukraine.
Consumers' income expectations hit their highest level since GfK started collecting data for reunified Germany in January 1991.
A stable labour market has resulted in consumers expecting decent pay hikes this year and moderate inflation is boosting Germans' purchasing power.
Unions have already secured strong wage hikes for chemical workers and public sector employees this year and GfK said the first wage agreements in 2014 suggested that wage increases of 3 percent or more were realistic.
Shoppers were less inclined to splash their cash in April than they were the previous month though. Gfk said this could be due to households wanting to save more as an escalation in the Ukraine crisis probably caused uncertainty among some consumers.
GfK said shoppers' propensity to make purchases nonetheless remained on an upward trend overall.
Domestic conditions remained supportive for consumers, although risks from the international environment had increased and while the effects of the Ukraine crisis on German consumer confidence had been moderate until now, a further escalation could be a burden, GfK said.
(Reporting by Michelle Martin; Editing by Susan Fenton)