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Livesquawk - German ZEW Investor Morale Drops For 5th Straight Month
German ZEW Investor Morale Drops For 5th Straight Month
Supply chain problems continue to plague Europe's largest economy.

By Eric Culp, European Editor

LiveSquawk News

@EricCulpLS

12 October 2021 | 10:10 GMT

 

FRANKFURT – Investor sentiment in Europe’s largest economy showed sharper-than-expected declines in October as growth, inflation and supply concerns soured the mood among financial market experts.

 

The results of the ZEW economic institute’s monthly survey produced the fifth consecutive drop in the forward-looking economic sentiment gauge, which fell to 22.3 versus the market estimate of 24.0 and last month’s 26.5 reading. The current conditions indicator was also well off expectations with a sharp decline to 21.6 compared to a market forecast of 29.5 and 31.9 last month.

 

“The economic outlook for the German economy has dimmed noticeably,” ZEW President Achim Wambach said. He noted that the drop “is mainly due to the persisting supply bottlenecks for raw materials and intermediate products. The financial market experts expect profits to go down, especially in export-oriented sectors such as vehicle manufacturing and chemicals/pharmaceuticals.”

 

The outlook for the Eurozone also worsened for the fifth consecutive time with a fall to 21.0 versus 31.1 in September.

 

The economic sentiment reading, the index’s measure for expectations over the next six months in Germany, has been losing ground since June, and ING’s Carsten Brzeski suggested it still hasn’t reached its nadir. “No turning point in sight,” he tweeted.

 

Lack of clarity in economics and politics

The unexpectedly sharp declines follow last week’s report of a 4% monthly drop in August industrial production in Germany and September’s 4.1% domestic inflation rate, the highest in almost 28 years. A number of economic organisations have also lowered their growth outlooks for Germany this year.

 

Additionally, the structure of Berlin’s next government remains unclear following last month’s federal elections, and this uncertainty may also be fanning fears among investors. Observers expect the centre-left Social Democrats to lead a three-way coalition with the pro-business Free Democrats and the environmentally minded Green Party, but political mavens are well aware that the latter two may lack enough policy overlap to come to an agreement on how to govern.