German Investor Optimism Drops for Second Month in Summer Wobble

  • Expectations index decreases to 17.5 from 18.6; est. 18
  • Still, ZEW says prospects for German economy remain positive

German investors are experiencing a bit of mid-year doubt.

Investor confidence dropped for a second month in July, according to the ZEW Center for European Economic Research. Its index of expectations, which aims to predict economic developments six months ahead, slid to 17.5 from 18.6 in June. Economists surveyed by Bloomberg predicted a decline to 18.

Germany is entering a period of uncertainty as it heads toward September elections and the European Central Bank starts discussing when it might wind down euro-area monetary stimulus. Still, the DAX Index is picking up again after sliding in June, and the Bundesbank says it expects “lively” manufacturing and employment growth to ensure a continued robust expansion.

ZEW President Achim Wambach said the research center remains optimistic about the prospects for the nation’s economy.

“Our overall assessment of the economic development in Germany remains unchanged compared to the previous month,” he said in a statement. “The outlook for the German economic growth in the coming six months continues to be positive. This is now also reflected in the survey results for the euro zone.”

ZEW’s gauge for current conditions in the currency bloc climbed to 28.7 from 20.5, the report showed. Its measure for expectations in the euro area slid to 35.6 from 37.7, and an index of German current conditions eased to 86.4 from 88.

Germany’s fortunes are key for the 19-nation euro area. ECB President Mario Draghi and his Governing Council will debate their stimulus settings this week before making a policy decision on Thursday. Economists surveyed by Bloomberg predict that any change to bond purchases or interest rates is more likely to come at the September meeting.

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