German Investor Confidence Declines as Growth Prospects Weaken
Bloomberg News
German investor confidence decreased for a 10th month in October in a sign Europe's largest economy is struggling to find its footing amid slack euro-area growth and rising tensions in Ukraine and the Middle East.
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, declined to minus 3.6 in October from 6.9 in September. That's the lowest level since November 2012. Economists had forecast a drop to zero, according to the median of 35 estimates in a Bloomberg News survey.
The German economy is on the edge of recession after gross domestic product declined in the second quarter. Factory orders, industrial output and exports plunged in August by the most since January 2009, and the country's benchmark DAX Index (DAX) of stocks has dropped 13 percent since early July to the lowest level in a year.
The frail sentiment reflects 'continued geopolitical crises and skepticism about the effectiveness of the latest European Central Bank measures,' said Peter Meister, an economist at BHF-Bank AG in Frankfurt. 'Economic indicators have been very unfavorable recently. The stock-market slide should have also had negative implications.'
Disappointing Data
A raft of disappointing data including a larger-than-anticipated decline in Ifo business confidence in September has sparked concern about the health of Germany's economy. The International Monetary Fund cut its economic-growth forecasts for the country last week, and French Finance Minister Michel Sapin said the signs of weakness show 'no country is immune.'
Wolfgang Schaeuble, his German counterpart, blamed at least part of the slowdown on global crises such as the Ukraine conflict and the effect of sanctions against Russia.
'This year, we have some weakening,' he said in Washington last week, where he attended the annual meeting of the IMF and the World Bank. 'We don't have a recession in Germany.'
The economy probably posted zero growth in the third quarter, according to an outlook by four research institutes advising Chancellor Angela Merkel's government. The group cut its 2014 growth forecast to 1.3 percent from 1.9 percent in April and trimmed next year's prediction to 1.2 percent from 2 percent.
MAN SE, Europe's third-biggest truck maker, is reducing manufacturing at plants in Germany and Austria in response to what it said could be a drop in European industrywide deliveries of as much as 15 percent in 2014.
ECB President Mario Draghi is trying to combat anemic growth and inflation in the 18-nation euro area with a combination of record-low interest rates, long-term loan and asset purchases that may expand the institution's balance sheet by as much as 1 trillion euros ($1.3 trillion).
While he's so far stopped short of committing to large-scale purchases of sovereign debt, more than half of the economists in Bloomberg's monthly survey predict he'll eventually announce a quantitative-easing program similar to those carried out by the U.S. Federal Reserve and the Bank of England.
To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net Jana Randow, Paul Gordon
Post a Comment for "German Investor Confidence Declines as Growth Prospects Weaken"