German investor confidenceslumped in August

17th August 2004, Comments 0 comments

17 August 2004 , BERLIN - German investor confidence slumped in August, a key economic indicator released Tuesday showed amid concerns about record-high oil prices, falling stock markets and worries about the global economic outlook. Compiled by the Mannheim-based Centre for European Economic Research, the so-called ZEW index dropped to 45.3 points in August after rising for two consecutive months to 48.4 in July. It stood at 47.4 in June. The fall in August was more than forecast by economists who had exp


17 August 2004

BERLIN - German investor confidence slumped in August, a key economic indicator released Tuesday showed amid concerns about record-high oil prices, falling stock markets and worries about the global economic outlook.

Compiled by the Mannheim-based Centre for European Economic Research, the so-called ZEW index dropped to 45.3 points in August after rising for two consecutive months to 48.4 in July. It stood at 47.4 in June.

The fall in August was more than forecast by economists who had expected the index to come in at 47.5 points this month. The index is now at its lowest level in 13 months.

"The assessment by financial analysts coincides with fears that the momentum of the economic recovery in this country will weaken because uncertainty about the global economy and the oil price has mounted," ZEW President Wolfgang Franz said.

Based on a survey of 291 institutional investors and analysts, the ZEW survey acts as a curtain raiser to the release later in the month of the more broadly based and closely watched German Ifo business confidence survey.

The latest ZEW survey was also held against the backdrop of growing demonstrations in the Germany against the plans by Chancellor Gerhard Schroeder Social Democrat-led government to cut jobless benefits and roll back the nation's welfare state.

Coming in the wake of worries that growth in the US and Japan may have hit a soft patch, the ZEW's fall in August is likely to add to concerns that economic expansion in Europe's biggest economy may slow in the coming months as Germany's central bank, the Bundesbank warned this week.

"Indeed, the recent economic data from the US gives reason to be concerned that the very strong export demand in Germany up to this point could weaken," the ZEW said.

Echoing the comments by the Bundesbank, the ZEW said: "Furthermore, the high oil price reduces the purchasing power of consumers and puts pressure on domestic demand. "

The ZEW institute conducted the August survey amid concerns that Germany's high unemployment rate combined with soaring energy prices meant that private consumption would continue to stagnate and consequently fail to underpin the recovery which so far has been lead by exports.

Moreover the August drop in the ZEW indicator is likely confirm analysts' forecasts that the European Central Bank will keep its benchmark refinancing rate on hold at its current historic low of 2 per cent possibly into the new year.

That said, however, the investors' assessment of Germany's current conditions was less pessimistic than a month ago with the ZEW indicator rising to minus 65.2 in August, from minus 69.3 in July.

The investors' assessment of current economic conditions in the 12-member eurozone also increased, from -40.5 points to -33.5 points.

But going forward, those responding to the survey less optimistic about the eurozone with a gauge measuring expectations for the currency bloc falling to 52.0 this month from 55.5 a month earlier.

DPA

Subject: German news

 

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