German Investor Confidence in Economy Unexpectedly Declines

  • Expectations index falls to 18.6 from 20.6; est. 21.7
  • ZEW says prospects for German economy remain favorable

German investor confidence unexpectedly dropped in June in a sign that exaggerated optimism in Europe’s largest economy is beginning to moderate.

The ZEW Center for European Economic Research in Mannheim said on Tuesday that its index of investor and analyst expectations, which aims to predict economic developments six months ahead, fell to 18.6 from 20.6 in June. Economists in a Bloomberg survey predicted an increase to 21.7.

With business confidence climbing to the highest level since 1991 and manufacturers and service providers reporting the fastest expansion in six years, sentiment indicators have recently exceeded already strong economic fundamentals. The Bundesbank described Germany’s upswing as “broad-based and fairly brisk” when it lifted its projections for growth through 2019 last week.

“The prospects for the German economy remain favorable,” ZEW President Achim Wambach said in a statement.

ZEW’s gauge for German current conditions rose to 88 in June from 83.9. That’s the highest level since July 2011, according to the report.

Germany’s favorable economic conditions are bolstering prospects for the 19-nation euro area. European Central Bank President Mario Draghi said last week -- for the first time in almost six years -- that risks to the region’s growth outlook are “broadly balanced.” ZEW’s measure for expectations in the euro area advanced to 37.7 from 35.1.

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