German investor confidence slipped further in January, a widely watched survey shows today, with a recession in the US seen as the key danger for the euro zone's biggest economy.
The ZEW economic institute's indicator of German business sentiment fell to -41.6 points, from -37.2 points in December, ZEW said in a statement. A negative result indicates that those polled expected growth to slow down.
'The largest risk for the development of the German economy is the danger of a recession in the US following the financial market crisis,' a statement from ZEW said.
ZEW said that hopes for stronger German growth rested on a pick up in domestic consumption that is expected to increase following gains in German employment. But consumers have been reluctant to splurge owing to a spike in oil and food prices late last year.
'Private consumption will play a decisive role for the economic development in the upcoming months,' ZEW said.
'However, the introduction of minimum wages or excessive wage claims are not appropriate measures in order to increase consumer spending as they go with cuts in employment', the statement quoted ZEW president Wolfgang Franz as saying.
Germany has begun wage talks with civil servants that are to be followed by more with workers in the steel and services sector.
After years of wage stagnation, unions are demanding increases of 8% or more, while the European Central Bank warns that further price and wage hikes could spawn longer-term inflation that would hobble the 15-nation economy.
The ZEW survey of 270 financial analysts and institutional investors gives an indication of the sector's current and medium-term expectations for economic activity and capital markets.
For the euro zone, economic expectations worsened in January to -41.7 points, the survey found, while the indicator for the current economic situation also decreased, though it remained in positive territory at 47.8 points.
