A key gauge of German investor confidence fell to its lowest level in 15 months in September as oil prices remained high and the global economy showed signs of a slowdown, the ZEW research institute said today.
The Mannheim-based think tank said its expectations indicator for Germany, based on a survey of 298 analysts and institutional investors, fell more than expected to 38.4, the lowest since June 2003's 21.3, from 45.3 in August.
"The reason for the drop in optimism is based on expectations for a slowdown in the global economy due to mixed data from the US," the institute said in a statement.
"Because Germany's economic recovery is still dependent mainly on exports, the factors powering growth could weaken in coming months," it said, warning that high oil prices could hold back the hoped-for pickup in domestic demand.
The euro weakened against the dollar and yen after the survey results were released. Euro zone government bond prices rose briefly before easing back to leave yields flat.
Mr Joerg Kraemer, chief strategist at Invesco Asset Management in Frankfurt, said the "collapse" in the ZEW indicator in September was "shocking news for the European Central Bank".
It would likely be forced to revise down its 2.3 per cent growth forecast for the euro zone for next year, he predicted. "This is the reason why we expect the ECB not to hike rates already in 2004," he added.
Germany, Europe's biggest economy has relied on strong demand for its goods from countries such as the United States and China to power a recovery as rising unemployment crimps the consumer spending that accounts for some two-thirds of gross domestic product.
However, data last week showed Germany's trade surplus narrowed in July suggesting higher oil prices may already be weighing on world growth.