ez/german jul 18 sentix, zew sentiment - reaction
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Tuesday, 10 July 2018


  • ZEW German economic sentiment hits lowest level since August 2012
  • Sentix poll shows increased concern about Germany, more hope for Eurozone


Investors raised further doubts about the business environments in Germany and the Eurozone Monday and Tuesday as sentiment indexes widely fell for both regions.


On Tuesday the ZEW economics institute said its forward-looking indicator of German investor sentiment dropped for the sixth consecutive month, declining to -24.7, the lowest level in nearly six years. Analysts had expected a drop to -18.9.


The assessment of the current situation in Germany recorded its sixth straight decline. It fell to 72.4 versus the 78.1 estimate.


The ZEW’s Eurozone economic sentiment index plunged to -18.7 from -6.1 in June.


On Monday, Sentix said its headline index for German investor confidence lost ground for the sixth straight month when it fell to 16.2, the lowest level since February 2016.


The only bright spot from the investor surveys came from the Sentix poll: Eurozone investor confidence rose to 12.1, beating the estimate of 9.0.


ZEW President Achim Wambach said his institute's latest survey period had been “marked by great political uncertainty”.


A German political conflict was seemingly resolved after a number of investors had already returned their ZEW surveys, the economics institute said. Nearly 40pct of responses arrived before German conservative parties struck an immigration deal to end a battle that threatened to scupper the government of German Chancellor Angela Merkel.


The ZEW president said, “Fears over an escalation of the international trade war with the United States have dampened the economic outlook. The positive news regarding industrial production, incoming orders and the labour market have been greatly overshadowed by the anticipated negative effects on foreign trade.”


Despite the souring mood among investors, Europe’s biggest economy remains strong, analysts explained.


In a note, VP Bank Chief Economist Thomas Gitzel said: “Here’s the bet: If the trade war does not escalate, the ZEW index in August will be significantly better.”


ING Chief German Economist Carsten Brzeski said, “The (German) economy is nowhere near falling off a cliff. Instead, it seems to be in a transition period towards growth normalization.”


“Let’s take comfort from the fact that the track record of the ZEW index predicting slowdowns is mixed,” Brzeski said. “While similar downward corrections of investors’ confidence were leading severe slowdowns of the real economy in 2012 and late 2010, the last most significant fall of the ZEW index in 2006 was still followed by strong GDP growth.”


Eric Culp, LiveSquawk News - Frankfurt


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