ZEW indicator declines to negative 25.5 points on eurozone crisis, deteriorating prospects for export markets
Investor confidence for Germany fell to its lowest level of the year in August as European leaders struggled with solutions to its debt crisis and the economies of major trade partners showed no signs of picking up growth, according to a survey by the ZEW Centre for European Economic Research.
The ZEW indicator of economic sentiment for Germany dropped to negative 25.5 points last month from negative 19.6 in July. The index, which measures investor expectations for Germany for the next six months, fell even as investor confidence for the eurozone area in general rose 1.1 points to negative 21.2.
‘The indicator’s decline in August signals that financial market experts still expect the German economy to cool down over the next six months,’ say ZEW analysts Christian Dick and Frieder Mokinski in a statement. ‘In particular, export-oriented sectors may be affected.’
The simmering debt crisis in Europe and threat of the breakup of the eurozone has weighed on Germany and other European economies throughout the year as leaders discuss various bailout and austerity packages. Major trading partners including the US and China are showing little sign of being able to help boost the German economy, with the Chinese economy slowing and the US economy showing mixed indicators.
The survey, conducted between July 30 and August 13, canvassed the views of 262 analysts. The indicators reflect the difference between the percentage of analysts who have positive outlooks and those who have negative outlooks. Expectations for all major stock indices except the eurozone’s STOXX 50 fell, with Germany’s DAX dropping 7.2 points, the UK FTSE 100 falling 6.2 and France’s CAC 40 declining 0.8. The STOXX 50 rose 0.1.
The ZEW survey for the next six months shows an increase of 0.7 points for the US economy, to 4.4 points, making it the only country with expectations of overall improvement, albeit slight.
The indicator for the UK fell 6.4 points to negative 14.9, while the Italian outlook rose 0.5 points to negative 28.6 points, the lowest outlook of all countries measured.
Analysts and investors surveyed by ZEW in August rated the current economic situation in Germany as positive, at 18.2 points. This marks a drop of 2.9 points from July, however.
Despite the deterioration in August, the ZEW index for Germany is still well above the levels of the financial crisis of 2008, when ‘economic expectations temporarily dropped below the minus 60 points-mark,’ the analysts note.
