German investor confidence dips on Greek uncertainty

Zew index drops for first time in six months induced by ongoing Greece’s debt crisis

German investor confidence unexpectedly fell for the first time in six months, signaling that the uncertainty induced by Greece’s debt crisis may be weighing on Europe’s largest economy.

The Zew Centre for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, fell to 53.3 in April from 54.8 in March. Economists had forecast an increase to 55.3, according to the median of 33 estimates in a Bloomberg News survey.

The Bundesbank said on Monday that recent data suggest growth momentum in Germany is probably weaker than anticipated, though the economic expansion will continue to be "quite robust."

Factory orders dropped in the first two months of the year as fears of a Greek default damped demand. "The current weakness of the world economy is dampening export prospects and reducing the scope for further improvements of the economic situation in Germany," Zew president Clemens Fuest said in a statement. At the same time, "the German economy is in good shape. A stable labor market and increasing wages are strengthening confidence and boosting consumption."

READ MORE

The euro dropped after the report and traded at $1.0672 earlier. The benchmark Dax Index pared gains and was up 1.16 per cent at 12,030. GDP Growth Germany’s economy expanded 0.5 per cent in the three months through March, according to a Bloomberg survey of economists, and will continue to grow at that pace in the remaining quarters of the year. The “main driver of the still quite robust economic growth should have still been private consumption, at least as indicated by the strong increase in retail sales,” the Bundesbank wrote in its monthly report.

The economy is benefiting by the European Central Bank’s €1.1 trillion quantitative-easing program, which has pushed yields on German bonds with a maturity of as long as nine years below zero and propelled the benchmark Dax Index to a record this month.

Bloomberg