German investor confidence fell for a fourth month in April, highlighting the risks to the recovery in Europe’s largest economy.
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, slid to 43.2 from 46.6 in March. Economists forecast a decline to 45, according to the median of 37 estimates in a Bloomberg News survey. The gauge reached a seven-year high of 62 in December.
While the Bundesbank has said the German economy probably strengthened in the first quarter, business confidence has declined and manufacturing activity has slowed amid concern that an escalation of tensions in Ukraine and a cooling economy in China will threaten trade. A nascent euro-area recovery may also be curbed by a strengthening currency that depresses prices and hurts exporters.
“The crisis in Ukraine continues to sow uncertainty,” said Christian Schulz, senior economist at Berenberg Bank in London. “Fortunately, strong Germany is in the best position to deal with the fallout from the Ukraine crisis. That may act as a shield for the euro-zone recovery.”
Investor expectations for the future may have eased in part because current conditions are so strong, ZEW said in today’s report. A measure of the current situation climbed to 59.5, the highest reading since July 2011. A gauge of expectations for the euro area dropped to 61.2 from 61.5 the prior month.
The euro was down 0.1 percent at $1.3802 at 11:41 a.m. Frankfurt time. Germany’s DAX stock index was 1 percent lower at 9,250, taking its decline this year to 3.2 percent.
Economic headwinds have been highlighted by surveys including the Ifo institute’s measure of German business confidence, which dropped for the first time in five months in March.
Companies are assessing the risks from escalating European Union sanctions against Russia over its annexation of Crimea. Russia and Germany had $89 billion of bilateral trade in 2012. Stada Arzneimittel AG, Germany’s biggest maker of generic drugs, said last month that sales and profit will be lower than forecast in 2014 because of the conflict.
Gross domestic product figures for China tomorrow are forecast by economists to show a slowing economy. The Asian nation was Germany’s third-biggest trading partner in 2012 with $169 billion of exports and imports between the countries.
In the euro area, the European Central Bank has warned that the single currency’s almost 6 percent gain against the dollar in the past year undermines price stability. Inflation in the 18-nation bloc was 0.5 percent in March, about a quarter of the central bank’s goal of just under 2 percent.
ECB President Mario Draghi has said there is “unanimous” support among policy makers for unconventional measures to shore up inflation if needed, and hinted that further currency gains could prompt action.
ZEW’s survey, which covered 238 analysts from March 31 to April 14, didn’t show the exchange rate to be a major concern in Germany.
“We don’t see a particular indication that the situation is getting worse,” said Frieder Mokinski, an economist at ZEW. “Most respondents think the dollar will appreciate against the euro. Looking at the different industries, we don’t see a negative value for export-oriented industries.”
The German economy grew 0.4 percent in the three months through December. The statistics office is scheduled to publish first-quarter GDP data on May 15.