Investor confidence hit by Japanese crisis

German investor confidence has been hit by an expected interest rate hike and Japan's natural disaster and nuclear crisis, the closely followed ZEW survey indicated on Tuesday.

Investor confidence hit by Japanese crisis
Photo: DPA

The monthly ZEW poll of Germany’s financial sector showed a fall to an indexed 14.1 points in March from 15.7 points in February, a statement said.

Around 40 percent of the results in Europe’s biggest economy were received as or after the Japanese earthquake, tsunami and nuclear crisis occurred, but all the opinions were collected before the full extent of the crisis had emerged.

“The German economy is in a robust shape. Nevertheless, the tragic events in Japan could slow down the dynamics of German economic growth at least in the short run,” the statement quoted ZEW president Wolfgang Franz as saying.

Overall however, “the indicator shows that financial market experts continue to expect a positive economic development during the forthcoming six months,” it added.

Analysts polled by Dow Jones Newswires had expected the index to remain unchanged.

ZEW said that “the current survey period covered two major events,” a hint by the European Central Bank that it would raise its main interest rate next month, and the Japanese catastrophe which has slammed global stock markets.

The overall indicator, which measures financial market expectations, is well below its historical average of 26.7 points.

Citi analysts said in a research note however that “we do not expect the earthquake to overwhelm world economic recovery or investors’ risk appetite.”

A measure of how German investors view the situation at present edged higher meanwhile, gaining 0.2 points to 85.4 points, which was nonetheless lower than an analyst forecast for a rise to 86 points from from 85.2 in February.


Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.