UPDATE 1-German investor morale plunges to lowest since Jan 2013

Tue May 13, 2014 5:46am EDT

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(Adds details, economist, context)

By Kirsti Knolle and Eva Taylor

MANNHEIM, Germany May 13 (Reuters) - German analyst and investor sentiment declined for a fifth consecutive month in May to its lowest level in nearly 1-1/2 years as concerns intensified that economic growth in Europe's largest economy would slow in the second quarter.

Mannheim-based think tank ZEW's monthly survey of economic sentiment, released on Tuesday, dropped to 33.1 from 43.2 in April, missing the Reuters consensus forecast for a reading of 41.0 and undershooting even the lowest estimate for 37.1.

That sent the euro down to a one-month low against the dollar.

"The fifth consecutive decline in ZEW investor sentiment in May suggests that the German recovery might not gain much pace from here," said Jessica Hinds, economist at Capital Economics.

"Data later this week are likely to reveal that the German economy made a strong start to the year, perhaps expanding by a quarterly 0.7 percent or so. But today's survey broadly supports our view that this pace of growth is unlikely to be sustained."

Recent hard data has shown German exports posting their biggest fall in nearly a year, while industry output, orders and retail sales have all fallen.

But Germany's closely-watched Ifo survey of business sentiment improved, according to its latest reading, as firms shrugged off tensions over Ukraine. And current conditions were a bright spot in the ZEW survey, climbing to their highest level since July 2011.

After growth of just 0.4 percent last year, the government has predicted expansion of 1.8 percent this year, driven by domestic demand.

"The decline of the experts' economic expectations for Germany should be seen against the backdrop of a strong economic development in the first quarter of 2014," said ZEW President Clemens Fuest.

"Already, there are indications that Germany will not be able to maintain this fast pace of growth."

The economy ministry's monthly report on Tuesday said that after a robust performance between January and March due to a milder winter, the spring revival might be weaker than usual.

With Russian President Vladimir Putin having overturned years of post-Cold War diplomacy by seizing Crimea from Ukraine and a pro-Moscow uprising in the east of the country raising the prospect of civil war, there are other risks too.

A ZEW economist said it was unclear how far geopolitical risks had contributed to the headline indicator's decline but some economists suggested it played a role.

"The geopolitical conflict close to Germany's backyard, concerns about the Chinese economy and the recent equity market correction have clearly dented investors' optimism," said Carsten Brzeski, economist at ING.

"After the excellent start to the year, the German economy is now starting to feel some headwinds," he added.

The index was based on a survey of 248 analysts and investors conducted between April 28 and May 12, ZEW said.


For a link to a graphic on German ZEW, please click on:

link.reuters.com/cag54s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Kirsti Knolle and Eva Taylor; Writing by Michelle Martin in Berlin; Editing Stephen Brown)

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Comments (1)
Bradnaksuthin wrote:
Whenever I look at my 401 K portfolio I am reminded of how far we have come in 6 years.
6 years ago, as President Bush was preparing to turn the country over to Obama my 401K retirement had collapsed. I remember turning to my wife after looking at our Charles Schwarb statement as saying “We’ve lost half of our retirement investments”
As Bush was preparing to leave office in early 2009 I think the DOW have fallen to 8000 and the NASDAQ had plunged to 1500.
The country was in economic freefall. Banks were going out of business, housing prices were falling like a rock, hundreds of thousands of workers were being laid off every month. The US auto industry was on it’s knees begging for a bailout. The Bush administration borrowed 700 billion dollars from the taxpayers to bail out the banks..which were frozen in fear. Newscaster started using the word “2nd Great Depression”.
Back then, I thought to myself “I am actually going to live through an Economic Depression like my dad did”, “All my retirement savings for the last 30 years are going to disappear”. “We will end up having to work for the rest of our lives instead of enjoying retirement”

How different things are today…6 years later.
The worst recession in US history is over
People are going back to work
Banks are healthy and profitable again
The US auto industry is the pride of the nation
Housing prices are on the rise again
Gas prices, adjusted for inflation, are lower than they’ve ever been before
Inflation is low
Interest rates are low

And the stock market? Businesses are booming.
It’s in record territory. It has NEVER been this high
the DOW is higher than it has ever been in it’s history
the NASDAQ has tripled since the closing days of the Bush administration.

So….Now that I am actually in retirement and cashing out my retirement investments

6 years ago, with the country in economic chaos, I could not have dreamed that our country would be where it is today. It was unthinkable. Unimaginable.

Yet here we all are today….in a country that rose from the ashes of economic disaster called the GREAT AMERICAN RECESSION….to become a vibrant growing healthy economy.

in 2009 the Bush administration handed Obama handed a rotten lemon…and in 6 years he has turned it into sparkling Champagne.

May 13, 2014 9:34am EDT  --  Report as abuse
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