German investor sentiment declines

German analyst and investor sentiment fell in December for a third consecutive month, reaching its lowest level since July and…

German analyst and investor sentiment fell in December for a third consecutive month, reaching its lowest level since July and pointing to a slowdown in the pace of recovery in Europe's largest economy.

The Mannheim-based ZEW economic think tank's monthly poll of economic sentiment among analysts and investors came in slightly above forecast, at 50.4 in December, down from 51.1 in November.

The euro extended losses against the dollar after the ZEW data, for which a Reuters poll had forecast a reading of 50.0. The European single currency later recovered its losses.

"We are still at the bottom of a recession," said ZEW president Wolfgang Franz, who is also the head of the German government's panel of economic advisers. "Next year, we will see a recovery, but not an economic upswing."

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Germany pulled out of its deepest post-war recession in the second quarter, though data last week pointed to a stuttering recovery, with industry output falling 1.8 per cent from the previous month in October after two straight rises.

Separately, the Munich-based Ifo economic institute raised its 2009 and 2010 forecasts for German gross domestic product (GDP), but said tight credit conditions and an end to government stimulus would leave the economy in a weakened state.

In a statement, Mr Franz said exports were powering the German recovery and that the strength of corporate investment next year would depend on banks' readiness to lend. However, lenders had not yet cleaned up their balance sheets, he said.

Germany's exports rose 2.5 per cent from the previous month in October, fuelling hopes that the recovery in Europe's biggest economy could gain traction in the fourth quarter.

ZEW economist Michael Schroeder told reporters in Mannheim that the institute saw no evidence for a credit crunch yet, but acknowledged that fears of one emerging were growing.

The index was based on a survey of 277 analysts and investors and conducted between November 30th and December 14th.

A separate gauge for current conditions rose to -60.6 from -65.6 in November, the highest level in 13 months.