German investor confidence lowest in 13 years

17th October 2006, Comments 0 comments

18 October 2006, Berlin (dpa) - German investor confidence fell in October to its lowest level in more than 13 years, but the downturn was not as strong as in previous months, a key indicator showed Tuesday. The ZEW index compiled by the Mannheim-based Centre for European Economic Research (ZEW) slipped 5.2 points to minus 27.4 after a 22.2-point drop in September. It was the lowest level since March 1993 and the ninth consecutive monthly fall in the index, which measures sentiment among investors and anal

18 October 2006

Berlin (dpa) - German investor confidence fell in October to its lowest level in more than 13 years, but the downturn was not as strong as in previous months, a key indicator showed Tuesday.

The ZEW index compiled by the Mannheim-based Centre for European Economic Research (ZEW) slipped 5.2 points to minus 27.4 after a 22.2-point drop in September.

It was the lowest level since March 1993 and the ninth consecutive monthly fall in the index, which measures sentiment among investors and analysts six months down the track.

ZEW said business expectations were overshadowed by the potential downturn of the US economy, possible further rate increases by the European Central Bank and a decline in German consumer purchasing power as a result of VAT increases and other tax burdens in 2007.

A favourable development of incoming orders for German companies and the relatively low oil price during the survey period had a positive effect on the indicator, the research centre said.

ZEW's gauge of current economic conditions improved from 38.9 points in September to 42.9, the highest rating since October 2000.

German Economics Minister Michael Glos said Tuesday he expected the German economy to grow about 2.5 per cent this year, well above the 1.6 per cent forecast in January.

A boom in exports and a growing domestic demand have helped buoy the economy, said Glos, who is due to announce the latest gross domestic product (GDP) estimate for 2006 on Friday.

The 298 analysts and institutional investors who participated in this month's ZEW survey did not expect the current recovery to turn into a boom, but to mark a downward turn, said ZEW expert Sandra Schmidt.

"The good news is that expectations are about to stabilize. The bad news is that they will level out at a comparatively low level which was also caused by the unsuccessful reform of the German health system," said ZEW president Wolfgang Franz.

Germany's ruling coalition earlier this month struck a deal on an extensive overhaul of the loss-making public health system, but the reforms were criticized by German industry, which said they would add to non-wage labour costs.

ZEW said its survey also showed economic expectations for the euro zone decreased by 2.3 points in October and now stands at minus 12.5. The corresponding indicator for the current economic situation in the euro zone increased slightly by 2.6 to 43.1.

DPA

Subject: German news

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