Investor confidence slumps to 2008 lows
Published on: 23 Aug 2011 16:54 CET
German investor confidence slumped for the sixth consecutive month to a level last seen in December 2008, the height of the global financial crisis, the ZEW index showed, while a purchasing manager's index for the 17-nation eurozone compiled by London-based researchers Markit was stuck at a two-year low.
Private sector eurozone economic activity stagnated, with Markit's closely-watched survey showing only marginal growth overall and a switch into negative territory for manufacturing.
In Germany, the biggest eurozone economy, the ZEW economic expectations index fell a massive 22.5 points to stand at minus 37.6 points, far below its historical average of 26.2 points.
The drop to a level last seen in 2008 was the biggest since just after the US investment bank Lehman Brothers collapsed and was worse than expected, with economists polled by Dow Jones Newswires predicting on average a fall to minus 26 points.
"The fear of a recession in the United States together with the downgrade of the credit-rating (of the US) has further increased macroeconomic uncertainty," a ZEW statement said.
As a result also of the eurozone debt crisis and weak German economic activity in the second quarter, "financial market experts are far more sceptical now with respect to future economic growth," it added.
The German economy, the eurozone's biggest, expanded by a measly 0.1 percent in the second quarter after posting a strong gain of 1.3 percent in the first.
The ZEW survey's current conditions index plunged to 53.5 points from July's 90.6 points meanwhile, "showing the strongest monthly fall ever since the start of the time series in December 1991," UniCredit economist Andreas Rees noted.
ZEW's readings were based on surveys of 286 analysts and institutional investors, it said.
Its latest result "adds to the evidence that the German economy has taken a turn for the worse," commented Jennifer McKeown, senior European economist at Capital Economics.
"Admittedly, the survey might have been unduly influenced by recent falls in equity prices, suggesting that it could rebound if market conditions improve," she said.
"But the decline probably also reflects investors concerns about the impact of bailing out indebted eurozone countries on the German economy and public finances."
Berenberg Bank senior economist Christian Schulz said the ZEW poll and PMI data taken together "support our view that the most likely scenario for the economic cycle going forward remains a growth pause until the end of the year."
Economists felt that the Ifo survey of German business sentiment due on Wednesday would be "more informative of current developments at present," in the words of Ralph Solveen at Commerzbank.
Rees forecast "at least some negative spillover effects from financial markets into the real economy," however.
“A synchronous slowdown in the global economy is under way, thereby weighing on overall sentiment in the export dependent German industry in coming months," he said.