German investor morale brightens, but view of current conditions is grim

Assessment of current economic conditions plunged to a four year low

Weaker growth in emerging markets, trade disputes and Brexit chaos are putting the brakes on a nine-year expansion. Photograph: iStock

Weaker growth in emerging markets, trade disputes and Brexit chaos are putting the brakes on a nine-year expansion. Photograph: iStock

 

Morale among German investors improved slightly in January, but their assessment of the economy’s current condition deteriorated to a four-year low, a survey showed on Tuesday, sending mixed signals for the growth outlook of Europe’s largest economy.

Weaker growth in emerging markets, trade disputes driven by US president Donald Trump’s ‘America First’ policies and the possibility that Britain will leave the European Union without a deal in March are putting the brakes on a nine-year expansion.

The ZEW research institute said its monthly survey showed economic sentiment among investors rose to -15.0 from -17.5 in December. This compared with a consensus forecast of -18.4.

“It is remarkable that the ZEW Economic Sentiment for Germany has not deteriorated further given the large number of global economic risks,” ZEW president Achim Wambach said.

The indicator nevertheless remained well below the long-term average at 22.4 points, the institute said.

A separate gauge measuring investors’ assessment of the economy’s current conditions plunged to hit a four-year low at 27.6. Analysts had expected the indicator to edge down to 43.5 from 45.3 in the previous month.

Mr Wambach said investors had already considerably lowered their expectations for economic growth in the past months.

“New, potentially negative factors such as the rejection of the Brexit deal by the British House of Commons and the relatively weak growth in China in the last quarter of 2018 have thus already been anticipated,” he added.

The German economy grew by 1.5 per cent in 2018, the weakest rate in five years and markedly slower than the previous year, data showed last week, as exporters are hit by US trade disputes and the car industry struggles to adjust to stricter pollution standards.

The government will update its 2019 economic growth forecast next week. In October, the economy ministry had predicted gross domestic product would expand by 1.8 per cent this year. The Ifo institute last month reduced its forecast to 1.1 per cent. – Reuters