Bloomberg News

German Investor Confidence Declines After Outlook Worsened

September 20, 2011

(Updates with current conditions index in fifth paragraph.)

Sept. 20 (Bloomberg) -- German investor confidence fell to the lowest in more than 2 1/2 years in September as Europe’s debt crises and a global slowdown damped the outlook for growth.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 43.3 from minus 37.6 in August. That’s the lowest since December 2008. Economists expected a drop to minus 45, according to the median of 37 estimates in a Bloomberg News survey.

Germany’s benchmark DAX share index has plunged 25 percent since late July as the global outlook worsens and Europe’s debt crisis erodes confidence in its banking sector. The European Commission last week cut its euro-area growth forecasts for the second half and warned the economy may come “close to standstill at year-end.” Standard & Poor’s today lowered Italy’s credit rating, saying weaker growth may mean the nation won’t be able to reduce the region’s second-largest debt load.

“There’s almost only bad news at the moment,” said Carsten Klude, head of investment strategy at M.M. Warburg & Co. in Hamburg. “The sovereign debt crisis and the global economic slowdown both continue to burden sentiment. We don’t expect Germany to slide into recession, but growth will be much weaker in the months ahead.”

ZEW said its gauge of current conditions fell to 43.6, the lowest since July last year, from 53.5. The euro rose slightly after the report to trade at $1.3678 at 11:10 a.m. in Frankfurt.

Second-Quarter Slowdown

German gross domestic product rose just 0.1 percent in the second quarter after jumping 1.3 percent in the first three months of the year. Growth in the euro area, Germany’s main export market, slowed to 0.2 percent from 0.8 percent as governments from Greece to Spain cut spending to rein in budget deficits. The 17-nation economy will expand 0.2 percent in the third quarter and 0.1 percent in the fourth, the European Commission predicted on Sept. 15.

Shares in SMA Solar Technology AG, Germany’s biggest solar- power company by market value, yesterday dropped to a two-year low after it reduced its profit forecast amid weaker-than- expected demand for rooftop systems.

Still, Germany’s Daimler AG, the world’s largest maker of heavy-duty vehicles, said it expects truck sales to keep growing even as economies show signs of cooling. “So far we’re not feeling a strong impact” from slowing growth, Andreas Renschler, head of the Daimler Trucks division, told reporters yesterday.

Household Spending

Germany’s Bundesbank said in its monthly bulletin yesterday that it expects “robust” growth in Europe’s largest economy in the third quarter as private consumption rebounds from a second- quarter slump. The central bank last month reiterated its forecast for growth of about 3 percent this year.

German unemployment at a two-decade low of 7 percent may boost household spending and help offset slowing exports.

Rudolf Besch, an economist at Dekabank in Frankfurt, said last week’s announcement by the European Central Bank that it is cooperating with the Federal Reserve to lend dollars to euro- area banks may also boost investor sentiment.

“Still, we expect a significant growth slowdown,” he said. “Sentiment is likely to remain volatile on both sides of the Atlantic due to the high uncertainty associated with the sovereign debt crisis.”

Greece’s ability to avoid a default hangs in the balance as international monitors prepare to assess whether Prime Minister George Papandreou can meet the conditions of rescue loans.

European Union and International Monetary Fund inspectors held a teleconference yesterday evening with Greek Finance Minister Evangelos Venizelos to judge whether the government is eligible for an aid payment due next month and on track for a second rescue package approved by EU leaders on July 21.

--Editors: Matthew Brockett, Simone Meier

To contact the reporters on this story: Christian Vits in Frankfurt at cvits@bloomberg.net; Jana Randow in Frankfurt at jrandow@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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