June 17, 2014 / 10:56 AM / 3 years ago

German investor morale unexpectedly falls again in June

The curve of the German share price index DAX board, is pictured at the Frankfurt stock exchange June 17, 2014.Remote/Stringer

MANNHEIM Germany (Reuters) - German analyst and investor morale unexpectedly fell again in June, to its lowest in about 1-1/2 years, a leading survey showed on Tuesday in a sign that second-quarter growth in Europe's biggest economy may weaken.

Still, the Mannheim-based ZEW think tank said a decision by the European Central Bank to cut interest rates and pump money into the sluggish euro zone economy appeared to be mitigating worries about the pace of the recovery in Germany and the euro zone.

ZEW's monthly survey of economic sentiment fell for a sixth straight month to 29.8 in June from 33.1 in May, confounding a Reuters poll forecast for a rise to 35.0.

"The recent fall in this index, together with the softer tone of the business surveys lately, suggests that the German recovery might not gain much pace from here," said Jennifer McKeown, senior European economist at Capital Economics.

She added, however, that the headline index was still above its long-run average.

Germany's economy grew 0.8 percent in the first quarter - its fastest quarterly rate in three years - as an unusually mild winter brought forward the typical spring upturn.

Recent data has shown German exports, industrial orders and output all rising, but the latest Ifo survey showed morale among businesses was weakening.

The Bundesbank has said it expects the German economy to slow in the second quarter before expanding more robustly again between July and September but that growth will probably not be as strong as the average rate for the first half.

ZEW president Clemens Fuest echoed that view.

"We had a strong first quarter in 2014 due to favourable weather conditions, but signs are that the second quarter will be weaker," said Fuest.

A separate gauge of current conditions increased to 67.7, its highest level since July 2011, from 62.1 points in May and overshooting the consensus forecast for a reading of 62.6.

Worries about the crises in Ukraine and Iraq did not influence the survey, ZEW said, adding that the ECB's raft of measures had helped sentiment.

The ECB cut interest rates to record lows earlier this month, launched a series of measures to pump money into the euro zone economy, and pledged to do more if needed to fight off the risk of Japan-like deflation.

"What we observe is that both the economic expectations for Germany and the euro zone have been higher since the (ECB)announcement than they were before," said ZEW economist Freider Mokinski.

The index was based on a survey of 234 analysts and investors conducted between June 2 and 16, ZEW said. About 180 of those responses came in on or after the ECB's move on June 5.

Reporting by Michelle Martin and Harro Ten Wolde; Writing by Madeline Chambers; Editing by Stephen Brown and Susan Fenton

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