German investor confidence fell sharply in August,
amid growing concerns about the nation’s economic outlook and
following the diesel vehicle scandal that has engulfed the country’s
car industry, according to a key indicator released Tuesday.
The Centre for European Economic Research (ZEW) said its closely
watched monthly indicator for Europe’s biggest economy fell more than
forecast, to 10 points this month, from a July reading of 17.5.
Analysts had expected the indicator, which is based on a survey of
213 institutional investors and analysts, would drop to 15 points
Any figure above zero indicates the number of respondents who see
growth ahead is higher than the number that expects a decline.
“The significant decrease of the ZEW economic sentiment indicator
reflects the high degree of nervousness over the future path of
growth in Germany,” said ZEW chief Achim Wambach.
“Both weaker-than-expected German exports, as well as the widening
scandal in the German automobile sector, have helped contribute to
this situation,” he said.
The ZEW helps to set the stage for the release later this month of
other key economic indicators, including the key German Ifo business
confidence survey, expected on Friday.
After climbing to a higher-than-forecast 116 points in July to post
its third consecutive monthly gain, analysts expect the Munich-based
Ifo economic institute will say its business climate index lost steam
in August, slipping back to a reading of 15.5 points this month.
The ZEW has been steadily declining since May, when it climbed to
20.6 – its highest level since August 2015.
“This deterioration is consistent with the relatively poor
performance of German and eurozone equity indices, both of which have
lost momentum since the start of the second quarter,” said Claus
Vistesen, chief eurozone economist with the research group Pantheon
In addition to weaker share markets unsettling investors, analysts
also point to the jump in the euro against the US dollar as possibly
hitting Germany’s manufacturing sector and consequently dampening
The August decline in the ZEW left the indicator well below its
long-term average of 23.9.
Despite the ZEW drop in August, Wambach said the German economic
outlook “remained relatively stable at a fairly high level.”
The strong economic upswing that has emerged in Germany so far this
year is set to gain momentum, underpinned by both solid domestic
demand and a gain in exports, the country’s central bank, the
Bundesbank said Monday in its monthly bulletin.
The Frankfurt-based Bundesbank believes German economic growth could
come in stronger in 2017 than its last forecast in June, when it
predicted calendar-adjusted growth of 1.9 per cent this year.