Gloomy German investor sentiment weighs on economy

Tuesday 15 July 2014 11.50
German investor sentiment falls to its lowest level since December 2012.
German investor sentiment falls to its lowest level since December 2012.

Investment sentiment in Germany fell to the lowest level for 19 months in July amid signs of a dent in activity in Europe's top economy, a survey found.

Even as the euphoria engendered by Germany's World Cup soccer victory reached its climax with the return of the national Mannschaft to Berlin yesterday, the widely watched investor confidence index calculated by the ZEW economic institute fell by 2.7 points to 27.1 points in July, it said in a statement.

Analysts had been projecting a shallower drop to 28 points this month. The index now stands at its lowest level since December 2012. 

"Germany has experienced a slight dent in economic activity recently - retail sales declined and industrial production as well as incoming orders dropped," said ZEW president Clemens Fuest.

The latest decline in the ZEW barometer "reflects this sobering development. On a general note, however, the medium-term economic outlook remains favourable," Mr Fuest insisted. 
For the survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.

The sub-index measuring financial market players' view of the current economic situation in Germany fell by 5.9 points to 61.8 points in July, its first decline since November 2013.

ING DiBa analyst Carsten Brzeski said that recent data had raised concerns of a possible stagnation in the German economy in the second quarter. 

"Weak industrial production, a sharp correction in the construction sector and the reversal of the positive weather effect from the first quarter do not bode well for second-quarter growth," Mr Brzeski said. 

Capital Economics economist Jennifer McKeown also believed that the latest ZEW reading "adds to signs of a slowdown in the euro zone's largest and strongest economy."