German investor morale slumps as economic outlook darkens

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.

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"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