German Investor Sentiment Crashes In Largest-Ever Drop
- German economy ‘on red alert’
- Majority of poll respondents expect Covid-19 to cut 2020 GDP by 1pct
Frankfurt, 17 March 2020 (LS NEWS) – German investor sentiment crashed to its lowest level since December 2011 as Europe continues to shutdown to protect the populace from the spread of the coronavirus.
The ZEW’s forward-looking economic sentiment index for March plunged to -49.5 from 8.7 last month in the biggest drop since the survey of investors and financial market experts began in 1991. Economists had expected a decline to -26.4
The current conditions index spiraled to its worst reading in a decade, falling to -43.1 from -15.7 in February to blow by the forecast of -30.0.
“The economy is on red alert,” ZEW President Achim Wambach said. “The financial market experts currently expect to see a decline in real gross domestic product in the first quarter, while also considering a further drop in the second quarter to be very likely.
“For the whole of 2020, the majority of experts currently expect a decline in real GDP growth of approximately one percentage point as a result of the corona pandemic.”
The ZEW’s indices for investor sentiment in the Eurozone showed similar declines.
Tuesday's plunge followed last week's massive monetary stimulus package from the European Central Bank and Germany's promise to provide unlimited credit to businesses suffering from the economic impact of the pandemic.
The ‘P’ word is in play
“In one word: Panic,” said ING Chief German Economist Carsten Brzeski in a note released after the announcement.
“The economic impact from Covid-19 and financial market turmoil make a technical recession in Germany inevitable,” he said. “We expect the German economy to shrink by more than 1.5pct year-on-year in 2020.”
Jack Allen-Reynolds, senior Europe economist at Capital Economics, was much more pessimistic. He said the ZEW headline index “is far from a perfect leading indicator of GDP growth, partly because it is produced from a survey of ‘financial experts’, rather than businesses and consumers. But for what it’s worth, on past form it is broadly consistent with the German economy contracting by about 4pct year-on-year.
“If shutdowns remain in place across the currency union, even that looks optimistic. So a considerable amount of additional policy support from the ECB and governments will be necessary.”
Border controls have reappeared across Europe’s free-trade zone over the past few days, and German states have begun to officially curtail gatherings and shutter non-essential shops and services as an increasing number of companies send staff home to work or close their business altogether.
The collapse of German investor sentiment portends even more bad news, according to Clause Vistesen, chief Eurozone economist at Pantheon Macroeconomics. “The slide is consistent with the dramatic shift in sentiment and prices in relation to the Covid-19 outbreak, and we doubt it will improve much anytime soon. The only reason to keep an eye on these data at this point is the extent to which they provide a lead on the March economic surveys, which are set to be unrelentingly terrible.”
- German economy ‘on red alert’
- Majority of poll respondents expect Covid-19 to cut 2020 GDP by 1pct
Frankfurt, 17 March 2020 (LS NEWS) – German investor sentiment crashed to its lowest level since December 2011 as Europe continues to shutdown to protect the populace from the spread of the coronavirus.
The ZEW’s forward-looking economic sentiment index for March plunged to -49.5 from 8.7 last month in the biggest drop since the survey of investors and financial market experts began in 1991. Economists had expected a decline to -26.4
The current conditions index spiraled to its worst reading in a decade, falling to -43.1 from -15.7 in February to blow by the forecast of -30.0.
“The economy is on red alert,” ZEW President Achim Wambach said. “The financial market experts currently expect to see a decline in real gross domestic product in the first quarter, while also considering a further drop in the second quarter to be very likely.
“For the whole of 2020, the majority of experts currently expect a decline in real GDP growth of approximately one percentage point as a result of the corona pandemic.”
The ZEW’s indices for investor sentiment in the Eurozone showed similar declines.
Tuesday's plunge followed last week's massive monetary stimulus package from the European Central Bank and Germany's promise to provide unlimited credit to businesses suffering from the economic impact of the pandemic.
The ‘P’ word is in play
“In one word: Panic,” said ING Chief German Economist Carsten Brzeski in a note released after the announcement.
“The economic impact from Covid-19 and financial market turmoil make a technical recession in Germany inevitable,” he said. “We expect the German economy to shrink by more than 1.5pct year-on-year in 2020.”
Jack Allen-Reynolds, senior Europe economist at Capital Economics, was much more pessimistic. He said the ZEW headline index “is far from a perfect leading indicator of GDP growth, partly because it is produced from a survey of ‘financial experts’, rather than businesses and consumers. But for what it’s worth, on past form it is broadly consistent with the German economy contracting by about 4pct year-on-year.
“If shutdowns remain in place across the currency union, even that looks optimistic. So a considerable amount of additional policy support from the ECB and governments will be necessary.”
Border controls have reappeared across Europe’s free-trade zone over the past few days, and German states have begun to officially curtail gatherings and shutter non-essential shops and services as an increasing number of companies send staff home to work or close their business altogether.
The collapse of German investor sentiment portends even more bad news, according to Clause Vistesen, chief Eurozone economist at Pantheon Macroeconomics. “The slide is consistent with the dramatic shift in sentiment and prices in relation to the Covid-19 outbreak, and we doubt it will improve much anytime soon. The only reason to keep an eye on these data at this point is the extent to which they provide a lead on the March economic surveys, which are set to be unrelentingly terrible.”
--- Eric Culp, European Editor
@EricCulpLS