German investor confidence dives further in August

23rd August 2011, Comments 0 comments

German investor confidence slumped in August for the sixth month running to levels last seen in late 2008 on worries about the eurozone debt crisis and weak prospects for economic growth, the ZEW indicator showed on Tuesday.

The closely watched ZEW economic expectations index fell a whopping 22.5 points to stand at minus 37.6 points, far below the indicators historical average of 26.2 points. In July, it had slipped by just 6.1 points.

The drop to a level last seen in December 2008 was worse than expected, with economists polled by Dow Jones Newswires predicting on average a fall to minus 26 points.

"The fear of a recession in the United States together with the downgrade of the credit-rating of (the United States) has further increased macroeconomic uncertainty," a ZEW statement said.

"Due to increased macroeconomic uncertainty, the critical development in the euro zone and the disappointing data on German GDP (gross domestic product) growth in the second quarter of 2011, financial market experts are far more sceptical now with respect to future economic growth," it added.

"This scepticism ... has increased dramatically" in recent months, the statement quoted ZEW president Wolfgang Franz as saying.

"Besides, expectations are in line with the pessimism about economic growth prevailing on stock markets," he added.

The survey's current conditions index also fell sharply to 53.5 points from July's 90.6 points, although it remained in positive territory above 50 points.

The indicator compiled by the Centre for European Economic Research (ZEW) was based on surveys of 286 analysts and institutional investors, it said.

Its latest reading "adds to the evidence that the German economy has taken a turn for the worse," commented Jennifer McKeown, senior European economist at Capital Economics.

"Admittedly, the survey might have been unduly influenced by recent falls in equity prices, suggesting that it could rebound if market conditions improve," she said.

"But the decline probably also reflects investors concerns about the impact of bailing out indebted eurozone countries on the German economy and public finances," the economist added.

"The ZEW index is driven by developments on financial markets, as it reflects the assessment of finance professionals. The index has been a reliable indicator of turning points of the economic trajectory, but not of the extent of these swings," Berenberg Bank senior economist Christian Schulz noted.

© 2011 AFP

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