Pessimism over Germany’s economy

INVESTORS remain deeply pessimistic about the future of the German economy, as Europe’s manufacturing powerhouse comes under pressure from global events.

The Zew Institute’s gauge of expectations for German economic performance rose to minus 28 in June from minus 34.3 in May, falling short of economists’ expectations.

Achim Wambach, Zew president, said: “The economy is still exposed to numerous risks, such as the effects of the sanctions against Russia, the unclear pandemic situation in China and the gradual change of course in monetary policy.

“Although expectations have improved, they are still deep in negative territory.”

Morgan Stanley economist Markus Guetschow said the reading suggested the German economy would record “modest growth” during the current quarter. Germany’s production-heavy economy is particularly exposed to the soaring costs of commodities, fuel and electricity, as well as disruption to global supply chains caused by lockdowns in China.

Claus Vistesen, from Pantheon Macroeconomics, said the findings “remain consistent with overall depressed investor sentiment”.

The Zew survey’s inflation expectations gauge dipped in the June survey, indicating investors expect eurozone inflation to cool in the next six months.

Stefan Schilbe, from HSBC, said the recovery in overall sentiment could be a “dead-cat bounce” after a recent plunge. “If financial conditions continue to deteriorate, the recovery of expectations could come to an end soon,” he said.

Data released yesterday confirmed German consumer prices rose 8.7pc in the year to May, the most rapid rate of inflation since the early 1970s and a record for the post-reunification era.