Investor confidence drops more than expected

19th April 2005, Comments 0 comments

19 April 2005, BERLIN - German investor confidence slumped in April with a key survey released on Tuesday showing that high oil prices have undercut the outlook for Europe's biggest economy and raised concerns about slowing global growth.

19 April 2005

BERLIN - German investor confidence slumped in April with a key survey released on Tuesday showing that high oil prices have undercut the outlook for Europe's biggest economy and raised concerns about slowing global growth.

Compiled by the Mannheim-based Centre for European Economic Research (ZEW), the 'ZEW index' fell 16.2 points to 20.1 points in April, from 36.3 points in March.

The drop was far more than forecast by economists, who had expected the index to slip to about 33 points.

The fall in the April ZEW indicator came in the wake of a batch of disappointing order book data, which the institute said had raised doubts about whether Germany's economic recovery could be sustained.

Combined with signs of a slackening off in global economic activity, uncertainty in stock markets and renewed concerns that the US economy might have hit a rocky patch, the ZEW said the pace of the economic upturn in Germany is expected to slow in the medium term.

Based on a survey of about 300 institutional investors and analysts, the ZEW survey is regarded as a prelude to the release later in the month of the more broadly-based German Ifo business confidence survey.

"The reform process must be pursued further in order to create confidence in sustainable economic recovery," said ZEW president Wolfgang Franz when releasing the survey.

The fall in April means that the ZEW indicator is now significantly below its historical average of 34.4 points.

But despite the rather gloomy picture that has emerged from the latest figures, economists believe that the German economy remains on a growth path.

"Despite the latest signs of a downbeat mood we remain cautiously optimistic for Germany this year and especially next year," said Michael Heise, chief economist of Germany's giant insurer Allianz AG and its banking offshoot, Dresdner Bank.

Nevertheless, most analysts expect German economic growth this year to fall short of even a meagre one percent following the economy's weak start to 2005.

Last week, the International Monetary Fund said it expects growth in Germany to come in at just 0.8 percent.

Allianz is also projecting a growth rate of 0.8 percent this year for Germany but expects growth to accelerate to 1.8 percent in 2006 with exports remaining the driving force behind the economy's expansion.

A slide in the euro since it hit an all-time high of 1.3666 against the dollar at the end of last year has also helped to ease some worries about the prospects for German exports.

DPA

Subject: German news

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