German investor poll produces mixed results: ZEW

17th May 2011, Comments 0 comments

German investors are less certain the country's economic recovery will last much longer, but remain fairly upbeat nonetheless, the closely watched ZEW index showed on Tuesday.

The index fell to 3.1 points in May from 7.6 points in April, the institute said, marking the third consecutive monthly drop to a level that was below an average analyst forecast of 3.5 points compiled by Dow Jones Newswires.

After Europe's biggest economy posted surpisingly strong quarterly growth of 1.5 percent in the first three months of 2011, "the financial market experts consider a further increase of the economic momentum to be unlikely," a ZEW statement said.

"Moreover, mixed signals regarding the state of the US economy as well as a weaker outlook for the Chinese economy might have dampened expectations," it added.

The index is now well below its historic average of 26.5 points.

The German economy rebounded from its worst post-war recession to grow by 3.6 percent in 2010, and the forecast from Berlin for this year is 2.6 percent growth in output.

"This strong dynamic is not going to last undamped," ZEW president Wolfgang Franz cautioned.

"Risks, such as the (debt) crisis in the eurozone and global economic imbalances, should be recognised," he addd.

ZEW polled 295 financial analysts and institutional investors for its latest survey.

"The small positive reading of the index suggests that a majority of the analysts surveyed still expect an improvement over the next six months," Goldman Sachs economist Dirk Schumacher noted.

Their assessment of the current economic situation in Germany improved for the 24th time running meanwhile, to an all-time high of 91.5 points, exceeding an analyst forecast for a slight gain to 87.5 points.

"At least for now, stronger headwinds, stemming from the Japanese events or geopolitical tensions in the Middle East and North Africa, have left the real economy unimpressed," ING senior economist Carsten Breski commented.

"To the contrary, the recent weakening of the euro exchange rate and the drop in commodity prices should actually be a blessing for the German economy. The wind remains in the German economy's sails," he forecast.

Many economists have estimated that with help from domestic demand in addition to its traditional pillar of support from exports, the German economy could expand by at least 3.0 percent this year.

Commerzbank economist Ralph Solveen said the latest movements in ZEW's data should "be taken with a grain of salt."

A closely-tracked survey of business sentiment by the Ifo institute is due next week, and its readings "now seem to be the better indicators," he said.

"They have also dipped lower (in recent months) but have yet to produce a clear signal of a reversal," of the positive economic trend, Solveen noted.

© 2011 AFP

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