German investors are less certain the country's economic recovery will last much longer, but remain fairly upbeat nonetheless, the closely watched ZEW index showed today.
The index fell to 3.1 points in May from 7.6 points in April, the institute said, marking the third consecutive monthly drop to a level that was below an average analyst forecast of 3.5 points.
After Europe's biggest economy posted surpisingly strong quarterly growth of 1.5% in the first three months of 2011, 'the financial market experts consider a further increase of the economic momentum to be unlikely,' a ZEW statement said.
'Moreover, mixed signals regarding the state of the US economy as well as a weaker outlook for the Chinese economy might have dampened expectations,' it added. The index is now well below its historic average of 26.5 points.
The German economy rebounded from its worst post-war recession to grow by 3.6% last year, and the forecast from Berlin for this year is 2.6% growth in output.
'This strong dynamic is not going to last undamped,' ZEW president Wolfgang Franz cautioned. 'Risks, such as the debt crisis in the eurozone and global economic imbalances, should be recognised,' he added.
ZEW polled 295 financial analysts and institutional investors for its latest survey. Their assessment of the current economic situation in Germany improved for the 24th time in a row meanwhile, to an all-time high of 91.5 points, exceeding an analyst forecast for a slight gain to 87.5 points.
Many economists have estimated that with help from domestic demand in addition to its traditional pillar of support from exports, the German economy could expand by at least 3% this year.
