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German Business Sentiment Falls Sharply in June

Reuters
Tuesday, 17 Jun 2008 | 6:11 AM ET

German investor sentiment plunged to its weakest level in 15 years in June, a leading survey showed on Tuesday, fuelling concerns about the outlook for Europe's largest economy and sending the euro lower.

ZEW Index Slumps in June
German business sentiment fell more than expected in June, because of increased expectations for an interest rate hike in Europe and high inflation, Matthias Kohler from ZEW told CNBC Tuesday.

The ZEW economic research institute's gauge of expectations for Germany, based on a poll of 264 analysts and investors, fell to -52.4 from -41.4 in May -- its lowest since December 1992.

A Reuters poll of 45 economists last week had pointed to a more modest dip in the index to -42.0.

"We had been expecting a decline but not of this size. In the past few weeks the economic environment has worsened noticeably," said Commerzbank economist Matthias Rubisch.

The euro erased gains versus the dollar while bund futures moved higher after the release of the data.

"The data is really quite shocking. The mood among the analysts has dropped close to freezing point," said Andreas Scheuerle of Dekabank.

The ZEW report followed a run of other weak economic data from Germany.

Manufacturing orders fell for the fifth month running in April.

"Repeatedly decreasing incoming orders indicate that Germany's momentum will lose steam in the next six months," ZEW said in a statement, adding: "Continuing price increases for energy and food are reducing the purchasing power of consumers."

In a sign that some German firms are experiencing tougher conditions, printing press maker Heidelberg said last month it expects operating profit to fall this fiscal year as costs for new products add to pressure from the strong euro.

A separate ZEW gauge of current conditions in Germany dipped to 37.6 from 38.6 in May, in line with expectations.

A gauge of expectations for the euro area fell to -52.7 from -43.6 the previous month.

The survey was conducted between June 2 and June 16, the Mannheim-based think tank said.

Contact Europe: Economy

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