Connect to Us LinkedIn Youtube RSS

Aruba, May 13, 2014 - German investor confidence fell for a fifth month in May in a sign of growing concern that threats from low inflation (ECCPEST) to a strong euro may undermine the recovery.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, slid to 33.1 from 43.2 in April. The gauge is at the lowest level since January 2013. Economists forecast a decline to 40, according to the median of 33 estimates in a Bloomberg News survey. The index has dropped every month since reaching a seven-year high of 62 in December.

Investor caution in Europe’s largest economy reflects concern that the slow recovery in the 18-nation euro area leaves it vulnerable to shocks. European Central Bank President Mario Draghi has signaled he may add monetary stimulus in early June because policy makers are “dissatisfied” with the inflation outlook, in part due to an increase in the exchange rate. “For a few months there has been negative news like problems in the emerging markets or the strong euro,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “ZEW expectations can hint at turning points in the GDP growth rate, so we should expect lower growth in the coming quarters.”
The euro declined after the report, dropping to $1.3748 at 11:19 a.m. Frankfurt time, down from $1.3771.

Slower Growth

A measure of the current situation climbed to 62.1, the highest reading since July 2011. A gauge of expectations for the euro area dropped to 55.2 from 61.2 the prior month.

The Bundesbank said last month that German economic expansion will slow this quarter after a strong start to the year. Industrial output unexpectedly declined in March, and manufacturing and services cooled in April. Gross domestic product probably rose 0.7 percent in the three months through March, economists said before data on May 15.
Commerzbank AG, the country’s second-biggest lender, reported first-quarter profit on May 7 that missed analysts’ estimates as net interest income dropped. The bank has been focusing on lending to German consumers and companies as it winds down soured shipping and real estate loans. GDP in the euro area, which will also be released on May 15, probably climbed 0.4 percent in the first quarter. While that would be the fastest pace in three years, companies have struggled to raise prices, reducing the incentive to invest. Inflation was 0.7 percent in April, less than half the ECB’s goal, according to an initial estimate. A final figure will be published at the same time as GDP.

Read more/ Source: