A leading confidence index in Germany, published this morning, fell sharply this month as the euro's strength and high oil prices affected investor sentiment.
The ZEW economic research institute's economic expectations index, based on a poll of 314 analysts and institutional investors, fell by 12.7 points to plus 50 points in May, ZEW said in a statement.
Although the ZEW index had been expected to fall this month, the scale of the decline took analysts by surprise. Consensus forecasts had been pencilling in a more modest fall to 60 points this month.
'One reason for the current slide could be the strong rise in the value of the euro against the dollar, which will burden the export industry,' said ZEW President Wolfgang Franz.
'Alongside that, the massive rise in oil prices is eating into private consumer income and the confidence bonus of the new government is waning,' he added.
The ZEW indicator represents the balance between positive and negative expectations for the economy over the next six months. If most analysts and institutional investors polled believe the economy will improve, the index shows a plus. If most are expecting a deterioration, the index shows a minus.
