According to the report from GfK institute, the mood among German consumers deteriorated unexpectedly heading into January, suggesting that household spending in Europe's largest economy could weaken at the beginning of next year.

The consumer sentiment indicator edged down to 9.6 from 9.7 in December. Economists had expected an increase to 9.8.

Household spending has turned into a steady and reliable driver of growth in Germany helped by record-high employment, inflation-busting pay hikes and historically low borrowing costs, providing a buffer against trade-related problems.

GfK researcher Rolf Buerkl said consumers were more pessimistic about the overall economic growth outlook. They also scaled back their personal income expectations, with GfK's sub-indicator falling to the lowest level in more than six years.

"News about job cuts in some industrial sectors, such as the car industry and automobile suppliers, are leading to less optimistic income expectations," Buerkl said.