German investor confidence fell more than analysts forecast after growth in Europe’s largest economy slowed at the start of the year.
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, fell to 41.9 in May from 53.3 in April. That’s the lowest level since December. Economists had forecast a decline to 49, according to the median of 31 estimates in a Bloomberg survey.
Growth in Germany slowed more than economists forecast in the first quarter, even as the euro area, its largest trading partner, expanded at the fastest pace in almost two years. While the Bundesbank predicts momentum in German manufacturing will be sluggish in the months ahead, it sees consumer spending supporting the economic recovery.
“The decline is probably related to worries about Greece and the rise in bond yields during the past few weeks,” said Aline Schuiling, senior economist at ABN Amro Bank NV in Amsterdam. “Domestic economic fundamentals are strong, employment is growing, real wage growth has jumped higher and corporate profitability has improved as well.”
German gross domestic product rose 0.3 percent in the three months through March, less than in neighboring countries such as France or Spain and the 19-nation euro area, which expanded 0.4 percent in the period.
A gauge of current conditions fell to 65.7 in May from 70.2 the previous month, ZEW said. While investors adjusted expectations after “unexpectedly poor growth figures” in the first quarter and turmoil in stock and bond markets, “only a small number of survey participants actually expect a deterioration of the economic situation,” ZEW President Clemens Fuest said in a statement.
The euro was little changed after the report and traded at $1.1192 at 11:05 a.m. Frankfurt time, down 1.1 percent. Earlier, the European Central Bank said it would frontload asset purchases to counter low liquidity in the summer months.
The German economy “will probably continue to expand in coming months,” the Bundesbank said in its monthly report published on Monday. The Ifo institute’s index of business climate rose to a 10-month high of 108.6 in April.