BERLIN – German investor confidence fell for the fifth month in May, a key economic indicator released Tuesday showed, pointing to concerns that surging oil prices and possible higher interest rates could slow the pace of recovery in Europe’s biggest economy.

Compiled by the Mannheim-based Centre for European Economic Research, the so-called ZEW index dropped to 46.4 points from 49.7 points in April. 

“The financial analysts’ opinion has not changed which is not a good omen for the expected economic recovery,” said ZEW president Wolfgang Franz in releasing the institute’s latest survey.

The drop in May was bigger than forecast by economists who had expected the index to have slipped to 49.0 points this month with those responding to the survey growing more pessimistic in May in their assessment of the current economic situation in Germany.

Compared to –72.5 last month, the ZEW indicator of the current economic situation dropped to –75.9 points in May. “The prevailing job market misery is likely to be decisive for this,” ZEW said.

Based on a survey of 313 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.

While the ZEW said its indicator continued to signal cautious optimism for an economic recovery, it did raise doubts about the dynamism of the long-awaited upswing.

Indeed, coming as global oil prices have surged to record highs, ZEW said that the drop in its May survey underscored worries that domestic demand in Germany was still stagnating and that the jump in energy prices combined with a pickup in inflation and the world economy will trigger higher interest rates.

Official European Union data released Tuesday showed inflation in the 12-member eurozone bouncing up in April to the European Central Bank’s two percent target. It stood at 1.7 percent in March.

At the same time, Germany’s federal statistics office said producer prices rose for a third consecutive month in April with prices rising by 0.4 percent from March and 0.9 percent from the previous year.

Ralph Solveen from Commerzbank AG also he believe that a recent batch of disappointing order book and production data had contributed to the May drop in the ZEW index.

The release of the ZEW survey came just one day after Germany’s central bank, the Bundesbank, said the nation’s economy was showing no signs of a “self- sustaining” recovery as a result of high unemployment and weak household expenditure.

But with Germany’s export machine continuing to gain strength, the ZEW said that a bigger drop in the May indicator had been prevented because of business optimism about strong foreign orders.

In contrast to the economic sentiment for the German market, economic sentiment among Germany’s eurozone partners remained fairly static in May.

Despite Germany posting a stronger-than-forecast growth rate of 0.4 percent in the first quarter, the ZEW indicator is likely to add to concerns that the nation could remain a drag on the performance this year of the economy built around the euro.

While the eurozone indicator for future economic trends edged up marginally, indicator measuring analysts’ assessment of the current economic situation rose from –54.4 points to –50.6 points.

 DPA

Subject: German news