German investor confidence may fall to its lowest level in 21 months in October as weaker global growth curbs exports.
The ZEW Center for European Economic Research will say today its index of investor and analyst expectations dropped for a sixth month, to minus 7 from minus 4.3 in September, the median of 39 forecasts in a Bloomberg News survey shows. That would be the weakest reading since January 2009. ZEW releases the report, which aims to predict developments six months ahead, at 11 a.m. in Mannheim.
Europe’s largest economy may cool after expanding at the fastest pace in two decades in the second quarter as waning global demand and a stronger euro damp foreign sales. At the same time, falling unemployment is boosting household confidence and spending, prompting the Bundesbank to predict yesterday that growth may exceed 3 percent this year. The benchmark DAX share index has gained 10 percent since Aug. 30.
“It would require a lot of fantasy to imagine that things would be even better in six months,” said Andreas Moeller, an economist at WGZ Bank AG in Dusseldorf, who forecasts a drop in the ZEW to minus 10. “We are seeing a slowdown in the pace of expansion, not a double-dip recession.”
ZEW’s measure of current conditions will probably rise to 64 from 59.9, the survey of economists shows. That would be the highest since November 2007 and the fourth month in which the number of optimists exceeds pessimists. Before that, the gauge had shown negative readings for 23 months.
Exports, the main driver of German growth, declined for a second month in August. A 17 percent jump in the euro against the dollar since June 7 is threatening to hurt sales outside the currency bloc just as the global recovery weakens.
The International Monetary Fund said on Oct. 6 it expects the world economy to expand 4.2 percent next year instead of a previously projected 4.3 percent. In 2010, the economy may grow 4.8 percent, the Washington-based fund said.
With governments across the euro region cutting spending and raising taxes to push down budget deficits, German companies may be forced to rely on faster-growing markets in Asia to boost sales.
Bayerische Motoren Werke AG and Daimler AG’s Mercedes-Benz, the two biggest makers of luxury vehicles, this month projected higher fourth-quarter sales on surging demand in China.
The Bundesbank said yesterday that domestic demand is also “increasingly aiding the economy.”
Hugo Boss AG, the German luxury clothier, on Oct. 14 raised its sales and earnings forecast for this year after reporting a 19 percent increase in third-quarter revenue.
Consumers may step up spending as companies add workers, Germany’s leading economic institutes said Oct. 14. The country’s unemployment rate will drop to 7 percent in 2011 from 7.7 percent this year, the institutes said.
“You will never see a consumer boom in Germany and it will never compensate for a serious drop in exports,” said Carsten Brzeski, an economist at ING Group in Brussels. “But order books are still full to the brim, which should ensure some growth even if new orders stopped completely. Just get used to slower growth rates.”