German investor sentiment deteriorated for the first time in three months in April, weighed down by concerns about inflation, a closely watched survey showed on today.
The Mannheim-based ZEW research institute said its economic sentiment index, based on a survey of 307 analysts and institutional investors, fell to -40.7 this month from -32.0 in March.
The mid-range forecast in a Reuters poll of 48 economists last week was for an April reading of -29.0, with forecasts ranging from -40.0 to -22.3.
"This is not so surprising if you look at the high oil price and the strong euro. The financial market experts have for some time been significantly more pessimistic than companies," said Thomas Amend, economist at HSBC Trinkaus.
German inflation accelerated in March, with the country's EU-harmonised measure of inflation (HICP) rising to 3.2 per cent, just a tenth of a point below its highest ever level.
"Economic expectations were affected by the extraordinary high price pressure in Germany this month," ZEW said in a statement.
Concerns that rising prices are eroding purchasing power have hit retail sales, which posted their biggest decline in over a year in February.
ZEW chief Wolfgang Franz said he would recommend the European Central Bank not to lower interest rates this year.
"I would advise the ECB not to lower interest rates this year. It has done a good job so far in not touching interest rates," Mr Franz told reporters. "With inflation rates of more than 3 percent, interest rate cuts are not possible."