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German investment sentiment slumps
AFP - Wednesday, August 18
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German investment sentiment slumps
BERLIN (AFP) - – A sharp drop in a closely watched German economic indicator stoked fears Tuesday that the strong recovery in Europe's powerhouse will peter out as demand for its all-important exports weakens.
The ZEW institute's sentiment index, based on a survey of 284 analysts and institutional investors, fell 7.2 points to 14 points in August, its fourth consecutive monthly fall and a much sharper drop than feared.
This contrasted with data last week showing that German gross domestic product (GDP) surging in the second quarter at its fastest rate since reunification in 1990, with output soaring 2.2 percent.
This helped the 16-nation currency union outpace the United States on a quarterly basis, with output rising 1.0 percent compared to 0.6 percent the other side of the Atlantic in the second three months of the year.
Exports, the backbone of the German economy, rocketed 28.5 percent year-on-year in June to reach 86.5 billion euros (111.7 billion dollars), close to pre-crisis levels.
Germany has long been criticised for doing little to get consumers shopping but a 31.7-percent leap in imports to a record 72.4 billion euros suggested that consumer demand is also healthy.
Media reports at the weekend said that Chancellor Angela Merkel's government is now pencilling in growth of around 3.0 percent this year, more than double the previous official projection of 1.4 percent.
In 2009, the global downturn pushed Germany into its worst recession since World War II, with output contracting 4.7 percent.
But there are growing signs elsewhere, not least in the United States, Japan and China, that conditions are worsening, raising the prospect that demand for German cars, chemicals and machinery may weaken.
The US Federal Reserve warned last week that the recovery in the United States, the world's biggest economy, would be "more modest" than expected, sending financial markets tumbling worldwide.
Growth in Japan in the second quarter was just 0.1 percent while manufacturing in China -- where many factories rely on German-made machinery -- contracted for the first time in 16 months in July, a survey showed this month.
India's industrial output also expanded at its slowest pace in 13 months in June.
"Given that economic growth worldwide is losing momentum, the euphoria about the growth rates in some industries is making financial market experts feel uneasy," ZEW chief Wolfgang Franz said.
Unicredit economist Alexander Koch said there were no signs of an "abrupt" end to the German recovery or of a "double-dip" recession.
But he added that the "momentum of the German economy is set to moderate substantially towards the end of the year and in 2011."
The German economy ministry said in its monthly report published Tuesday that output was set to continue expanding in the coming months but it admitted that the country remained dependent on foreign demand.
"Germany, as one of the leading export nations, always remains under the influence of the global economy, even when domestic growth is strong," the ministry said.
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