Germany suffers surprise fall of 20 points as investor confidence in industry plunges

CONFIDENCE in the German economy has crashed to its lowest level since the depths of the eurozone debt crisis, fuelling fears of a recession.

A survey by research group ZEW re- vealed a surprise fall in the Indicator of Economic Sentiment for Germany to -44.1 from -24.5 in August, below even the gloomiest of forecasts. Investors are now at their most pessimistic since December 2011 as Germany endures a deepening industrial downturn.

Achim Wambach, the ZEW presi- dent, blamed the latest slump on rising Us-china trade tensions, the risk of a global currency war and rising no-deal Brexit worries. German bund yields hit record lows after the index was released ahead of GDP figures today that may show the country’s economy has contracted for the second time in a year.

GDP is forecast to have dropped 0.1pc quarter-on-quarter in the three months to June after a sharp plunge in factory output, below the 0.4pc posted in the first quarter. The slump in confidence suggests “investors are antici- pating chaos”, warned Claus Vistesen, economist at Capital Economics.

After narrowly avoiding recession at the end of 2018, the rebound in Germany and the wider eurozone has lately as a global industrial slump intensified. The German economy relies heavily on exports and has been hit by the trade war as well as a global slump in motors, one of the country’s most important sectors. “The economy appears to be stuck between solid domestic fundamentals and external risks,” said ING economist Carsten Brzeski.

“The industrial slowdown is beginning to have an impact on the domestic economy while the entire economy seems to be flirting with recession.”