June 18, 2019 / 9:53 AM / 2 months ago

German investor morale drops on weak data, headwinds from abroad - ZEW

FILE PHOTO: Office buildings are pictured in the financial district of Frankfurt, Germany, September 15, 2018. REUTERS/Ralph Orlowski/File Photo

BERLIN (Reuters) - The mood among German investors deteriorated sharply in June, a survey showed on Tuesday, with the ZEW institute pointing to recent weak economic data and an escalating trade dispute between China and the United States.

ZEW said its monthly survey showed economic sentiment among investors plunged to -21.1 from -2.1 in May. Economists had expected a drop to -5.9.

The June reading was the lowest level since November 2018 and marked the second consecutive monthly drop.

ZEW President Achim Wambach said the steep drop was linked to greater uncertainty about the global economy and a downturn in data on the German economy at the start of the second quarter.

“The intensification of the conflict between the U.S. and China, the increased risk of a military conflict in the Middle East and the higher probability of a no-deal Brexit are all casting a shade on the global economic outlook,” he added.

A separate gauge measuring investors’ assessment of the economy’s current conditions edged down to 7.8 from 8.2 the previous month. Markets had predicted a slightly lower reading of 6.0.

The weaker-than-expected sentiment survey adds to signs that German economic growth will be meager this year and that an expected rebound in 2020 could be less impressive than forecast.

Germany’s influential Ifo institute earlier on Tuesday cut its 2020 growth forecast to 1.7% from 1.8% previously as it warned that a manufacturing recession was starting to spill over into other sectors.

The government expects the economy to grow by 0.5% this year and 1.5% next.

Reporting by Michael Nienaber; Editing by Michelle Martin

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