A majority of German investors now expect the euro zone's largest economy to slow over the next six months, with the euro zone's debt crisis is weighing heavily on sentiment.
The Mannheim-based ZEW economic think tank's headline sentiment index hit its lowest since January 2009 in June, falling into negative territory for the first time since last October at -9.0 points compared to 3.1 in May.
"Both the US and Greece were important contributors. It is a very cloudy situation in the US -- we have these modest comments from Bernanke, not so good production figures," Michael Schroeder told reporters on Tuesday.
"Of course the Greek crisis has an impact on the euro, not so much on the business cycle (...) there is no direct link between the debt crisis and the business cycle in Germany."
The survey, which missed a consensus forecast for -2.0 points, was based on a poll of 290 financial market participants mainly in Germany and conducted between May 30th and June 20th.
Ben May of Capital Economics argued the reading supported the view that Germany's rate of growth is rapidly losing steam.
"A slowdown is by no means disastrous for Germany. Nonetheless, weaker growth in the region's strongest economy may heap further pressure on the troubled periphery," he wrote.
The market-oriented ZEW sets the stage for the Ifo business climate index due on Friday, which is generally seen as a better indicator of underlying economic activity.
Although the Ifo is also expected to drop this month, it has consistently beaten market expectations, a discrepancy possibly explained by the larger sampling that includes thousands of small and mid-sized firms that form the backbone of the German economy.
Analysts, strategists and economists have all pointed to signs of a decline in activity across the world, although most still argue that the business cycle is simply cooling off after a rapid recovery from the global financial crisis.
Supply chains disrupted by Japan's earthquake in March have throttled industrial output in the United States, for example, while China has been determined to put a lid on spiraling asset and consumer prices even at the cost of growth.
Reuters
