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Investor confidence hits 18-month low

Investment sentiment in Germany declined for the sixth month in row in June, falling to its lowest level for 18 months amid concern Europe's top economy is losing momentum, a survey found on Tuesday.

Investor confidence hits 18-month low
Photo: DPA

The widely watched investor confidence index calculated by the ZEW economic institute fell by 3.3 points to 29.8 points in June. That was the lowest level since December 2012.

Analysts had been projecting a slight increase to around 35 points this month. "The indicator has decreased for the sixth time in a row," said ZEW president Clemens Füst.
   
"The recent decrease, however, was notably less significant than the May decrease, when the indicator lost more than ten points.
  
"The German economy is currently in a very good shape, but further increases are becoming more difficult," Füst said.
   
"We had a strong first quarter in 2014 due to favourable weather conditions, but signs are that the second quarter will be weaker," he said.
   
For the survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.
 
Fears justified?
   
A frequent criticism of the ZEW index is that it can be volatile and is therefore not particularly reliable.
   
"There recently had been doubts and concerns about the strength of the German economy," said ING DiBa economist Carsten Brzeski.
   
"Slowing emerging market economies, the economic weakness of Germany's most important trading partner France and ongoing geopolitical conflicts close to Germany's backyard looked set to take their toll on the German economy," the expert said.
   
"However, fears of crash landing were overdone," even if the fundamental risks had clearly not disappeared, Brzeski said.
   
Capital Economics economist Jennifer McKeown said investors had been unimpressed by the European Central Bank's recent raft of monetary easing.
   
The ZEW reading "adds to signs that the German recovery is nearing a peak," she said.
   
"Admittedly, the continued rise in the current conditions index is an encouraging sign that the recovery has continued for now," McKeown noted.
   
Furthermore, the headline index was still above its long-term average.
   
"But the recent fall in this index, together with the softer tone of the business surveys lately, suggests that the Germany recovery might not gain much pace from here," McKeown said.
   
Natixis economist Johannes Gareis similarly felt that "analysts don't really believe in a positive impact of the ECB stimulus on the German economy."
   
The renewed drop in the index "should also be seen against the background of still looming geopolitical risks," Gareis said.
   
"Indeed, as the crisis in Ukraine is dominating the news again since the start of this week and Russia cut off gas supplies to Ukraine yesterday, it won't be surprising to see an even lower ZEW headline index next month," he said.

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TRADE

‘Exports have steadily sunk’: Brexit sends Britain sliding down German trade rankings

Britain is slipping down the list of Germany's most important trade partners, official data showed Monday, after its 2016 vote to quit the EU marked an end to growth in exchanges.

'Exports have steadily sunk': Brexit sends Britain sliding down German trade rankings
A Eurotunnel employee checks a truck with a British flag sticker. Photo: DPA

Between January and July, Britain was only Germany's seventh-most important partner with combined imports and exports of almost €68.5 billion, federal statistics authority Destatis said.

Exports to Britain fell back 4.6 percent compared with a year earlier, to 47.1 billion, while imports shed 3.7 percent, to 21.3 billion. In 2015, Britain was fifth in the ranking.

Ahead of the island nation were China, the Netherlands, the US, France Italy and Poland, while Britain outstripped Austria, Switzerland and the Czech Republic among the top 10.

“Before the referendum, German exports to Britain rose continually from 2010 to 2015,” the statisticians noted.

“Since the referendum in 2016, exports have steadily sunk.”

For all The Local Germany's Brexit coverage CLICK HERE

The picture is different in imports, with Germany buying slightly more from Britain since the Brexit referendum.

But the gap between the two figures remains wide.

In the year to July, Britain bought €25.8 billion more of German goods than it sold in the opposite direction.

Auto industry woes made a strong contribution to weaker business between Germany and Britain, with cars and parts accounting for just below 25 percent of trade volume.

German auto exports to Britain fell 9.7 percent in January to July, while imports fell 9.1 percent.

READ ALSO: Brits face residence permit costs of up to €150 in no-deal Brexit

'Massive tariffs overnight'

As The Local reported in July, European trade association Business Europe warned against a no-deal Brexit. The consequence of a no-deal would be “massive tariffs overnight”, said the General Director of Business Europe, Markus Beyrer, to Funke Media Group newspapers.

Even if Boris Johnson claims the opposite, he is mistaken, Beyrer said, adding: “Yes, there will be customs duties.”

Beyrer said without a withdrawal agreement, the UK would move from fully integrated EU country status to absolute non-status. “There is hardly a country in the world, perhaps apart from North Korea, that would have an even worse level of agreements with the EU,” he said at the time.

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