World Economy

German investor morale slumps in August

German investor sentiment continued to fall in August, a closely watched survey on Tuesday showed, adding ballast to fears Europe's economic strongman is struggling.

ZEW's economic sentiment index fell to 25.0 this month, from 29.7 points in July and 31.5 in June. This was its fifth consecutive month of declines.

"The German economic engine is still running smoothly.However, under the current geopolitical and global economic circumstances, a substantial improvement of the economic situation in Germany over the medium term is improbable. That is why economic sentiment has declined," ZEW President Professor Clemens Fuest said in a press release on Tuesday.

The German benchmark DAX index accelerated losses to trade 1.3 percent lower on the day after the data was out.

A trader at the stock exchange in Frankfurt, Germany, Monday June 29, 2015.
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The euro pared some gains against the U.S. dollar, trading at $1.1029 after the news, having traded at $1.1045 beforehand.

Investors' assessment of the current situation in Germany improved slightly in August, to 65.7 points.

However, other data has supported the idea of a German slowdown, with the country posting an unexpected pullback in industrial output last Friday.

"The drop in the index echoes weakness in recent activity data, including industrial production and the PMI, suggesting that the German recovery will not gather much pace," said James Howat, European economist at Capital Economics, in a research note.

The situation in the euro zone remains uncertain, with Athens reporting on Tuesday that the terms of a third bailout deal for Greece had been agreed on.

On Thursday, Germany will report consumer price inflation data for July.

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—By CNBC's Katy Barnato. Follow her on Twitter @KatyBarnato.