Fears that the Eurozone’s largest economy is weakening were heightened today after a ZEW Economic Sentiment survey showed a dip in German investor confidence.
The index of investor and analyst expectations compiled by the Mannheim based ZEW Centre for European Economic Research dropped from October’s figure of minus 11.5 to minus 15.7 in November.
This result marks a notable plummet and the first decline since August. It has come as a surprise to some industry experts given that economists participating in a Bloomberg survey predicted a 1.5 increase to minus 10.0.
ZEW President Wolfgang Franz said of the result: ‘Prevailing recessionary developments in the Eurozone impact the German economy via foreign trade and a lack of confidence. This is likely to be a burden for economic growth in Germany during the next six months.’
The index aims to forecast economic circumstances half a year in advance.
This disappointing report is the latest in a string which hint at economic fissures at the heart of the Eurozone caused by declining exports, the global economic slowdown and European recovery fears.
Other recent data has shown higher-than-expected drops in German industrial production, exports and factory orders in September.
It has also been generally predicted that after posting growth of just 0.5 and 0.3 per cent in the first and second quarters of this year, third-quarter German economic growth will come in at 0.1 per cent.
This, according to Germany’s central bank Bundesbank, will then be followed by ‘stagnation or even a slight decrease in gross domestic product in the final quarter of the year’.
Flash third-quarter GDP data is scheduled for release on Thursday.
But it’s certainly not all doom and gloom for Germany. Market research company GfK has forecast a five-year high in consumer confidence for November and the jobless rate is still holding close to a twenty-year low.
An economist with Frankfurt based Dekabank asserted: ‘Everything is pointing to a contraction in the fourth quarter.’ Andreas Scheuerle then continued; ‘But the slowing of the German economy might only be a temporary phenomenon. We might see growth again at the beginning of next year.’
Ralph Solveen, an economic researcher with Commerzbank AG, reiterated this point saying; ‘The German economy is still quite solid. Once Draghi’s medicine for the Euro area kicks in, we will see a strong comeback. But I wouldn’t expect this to happen before the beginning of next year.’
As of 11:20 am
The Pound to Euro exchange rate is currently trading at 1.2535
The Pound to US Dollar exchange rate is currently trading at 1.5896
The Pound to Australian Dollar exchange rate is currently trading at 1.5276
The Euro to US Dollar exchange rate is currently trading at 1.2680
The Euro to Pound exchange rate is currently trading at 0.7975
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