German investor morale slumps as economic outlook darkens

Dax stock exchange hits a day’s low after results are published as pessimism gathers

The mood among German investors plummeted far more than expected in August, a survey showed on Tuesday, and German economic research institute the ZEW Institute blamed trade disputes and higher chances of a no-deal Brexit for a worsening outlook in Europe’s biggest economy.

ZEW said its monthly survey showed economic sentiment among investors fell to -44.1 from -24.5 in July, its lowest level since December 2011. Economists polled by Reuters had expected a drop to -28.5.

Germany’s Dax hit a day’s low after ZEW published the survey. The weak reading bodes ill for the German economy, which the government expects to grow by a meagre 0.5 per cent this year, and many economists expect to see a contraction in the second quarter when data is released on Wednesday.

ZEW president Achim Wambach said the survey pointed to a significant deterioration in the outlook for the German economy.


"The most recent escalation in the trade dispute between the US and China, the risk of competitive devaluations and the increased likelihood of a no-deal Brexit place additional pressure on the already weak economic growth," he said in a statement.

“This will most likely put a further strain on the development of German exports and industrial production,” he added.

A separate gauge measuring investors’ assessment of the economy’s current conditions fell to -13.5 from -1.1 in the previous month. Analysts had predicted a reading of -7.0.

"The ZEW survey gives a further clear warning signal of recession for the German economy," said Uwe Burkert, chief economist at LBBW Research. – Reuters