Ger­man in­vestor con­fi­dence un­ex­pect­edly drops amid risks

The Pak Banker - - BUSINESS -

Ger­man in­vestor con­fi­dence un­ex­pect­edly fell, sig­nal­ing con­cern that a global slow­down could weigh on Europe's pow­er­house econ­omy.

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 ahead, slid to 25 in Au­gust from 29.7 in July. The read­ing is the low­est since Novem­ber and com­pares with a me­dian es­ti­mate of 31.9 in a Bloomberg sur­vey of econ­o­mists.

The In­ter­na­tional Mon­e­tary Fund last month cut its forecast for global growth, sin­gling out fi­nan­cial-mar­ket tur­bu­lence in Greece and China. While Greece is now on the verge of a bailout deal, China de­val­ued the yuan on Tues­day by the most in two decades, a move that rip­pled through in­ter­na­tional mar­kets.

"On the one hand, the Greek is­sue is be­hind us, so that should kind of boost mar­kets," said Ana­toli An­nenkov, se­nior economist at So­ci­ete Gen­erale SA in Lon­don. "On the other hand, in Au­gust we've had more fo­cus on com­modi­ties and China, so it moved away from Europe, and some of those is­sues have been putting a lit­tle bit of new un­cer­tainty into the mar­ket."

Ger­many's DAX In­dex of stocks briefly ex­tended its de­cline af­ter the re­port. It was down 1.2 per­cent at 11,460 at 11:13 a.m. Frank­furt time. The euro was lit­tle changed at $1.1026.

Still, the na­tion's econ­omy re­mains sup­ported by record-low un­em­ploy­ment and in­ter­est rates that are driv­ing con­sumer spend­ing.

ZEW's mea­sure of cur­rent con­di­tions in­creased to 65.7 in Au­gust from 63.9 the pre­vi­ous month. A gauge of ex­pec­ta­tions for the euro area climbed to 47.6 from 42.7.

Growth in Ger­man gross do­mes­tic prod­uct ac­cel­er­ated to 0.5 per­cent in the sec­ond quar­ter, ac­cord­ing to the me­dian es­ti­mate in a Bloomberg sur­vey of econ­o­mists be­fore the data are re­leased on Fri­day. The rate of ex­pan­sion will stay at 0.5 per­cent in each of the fi­nal two quar­ters of 2015, a sep­a­rate sur­vey shows.

"The Ger­man eco­nomic en­gine is still run­ning smoothly," ZEW Pres­i­dent Cle­mens Fuest said in the re­port. "How­ever, un­der the cur­rent geopo­lit­i­cal and global eco­nomic cir­cum­stances, a sub­stan­tial im­prove­ment of the eco­nomic sit­u­a­tion in Ger­many over the medium term is im­prob­a­ble. That is why eco­nomic sen­ti­ment has de­clined."

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