German Investor Confidence Falls on Caution Over OutlookAlessandro Speciale
German investor confidence fell for a second month in February, signaling concern that the fragile recoveries in neighboring countries pose a risk to 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 55.7 from 61.7 in January, after reaching a seven-year high of 62 in December. Economists forecast a decline to 61.5, according to the median of 37 estimates in a Bloomberg News survey.
While German economic growth of 0.4 percent in the fourth quarter exceeded analysts’ estimates, investors are still cautious about the rest of the euro area, the nation’s biggest trading partner. Regional unemployment near a record high, shrinking bank lending and persistently low inflation have prompted the European Central Bank to say it may ease policy as soon as next month to support the subdued recovery.
“It’s more of a stabilization than a turn in sentiment,” said Thilo Heidrich, an economist at Deutsche Postbank AG in Bonn. “We’re at very high levels, the highest we’ve seen since the financial crisis.”
A gauge of the current situation rose to 50 in February from 41.2 the prior month, today’s report showed. A measure of expectations for the euro area dropped to 68.5 from 73.3. The survey ran from Feb. 3 to Feb. 17 and covered 251 participants.
The euro fell after the report. The currency traded at $1.3715 at 11:07 a.m. Frankfurt time, down from $1.3726.
ECB President Mario Draghi put investors on a month’s notice on Feb. 6 for further stimulus for the euro area, saying policy makers are willing and ready to act if needed. Officials, who kept the benchmark rate at a record low of 0.25 percent, hold their next rate-setting meeting on March 6.
At the same time, the regional recovery is showing signs of strengthening. European new car sales advanced for a fifth month in January, the European Automobile Manufacturers Association in Brussels said today. Registrations advanced 5.2 percent in Europe and 7.2 percent in Germany from a year earlier. Sales by Wolfsburg, Germany-based Volkswagen AG, the region’s largest carmaker, climbed 8.2 percent.
Gross domestic product in the euro area rose 0.3 percent in the fourth quarter, more than economists forecast, bolstered by stronger-than-expected expansions in France and the Netherlands and a return to growth in Italy.
German fourth-quarter growth was driven primarily by net trade, with exports rising “much more strongly” than imports, the country’s statistics office said on Feb. 14. Private consumption declined “slightly,” while investment in equipment and construction increased.
“Germany’s economic momentum should have picked up noticeably in the winter half 2013/2014,” the Bundesbank said in its monthly report yesterday. “Increasing stimulus from foreign demand, paired with a continually robust domestic economy, are crucial for the strengthening economic pickup.”
ZEW said concerns cited in the survey also included emerging-market volatility and indications that China’s economic growth will slow.
“There are a lot of new factors which increased uncertainty about the future business cycle,” said Michael Schroeder, an economist at ZEW. “Experts we asked were more cautious, but more cautious doesn’t mean people are now pessimistic about future growth.”