German investors became increasingly gloomy about the country’s economic prospects in July, a survey showed today, as they fretted over the raging US-China trade war and tensions in Iran.
The ZEW think tank’s indicator of economic sentiment fell to minus 24.5 points in July compared to minus 21.1 in March. Economists had been expecting a better reading of 22.3.
A separate indicator of investors’ views on the economic situation in Germany fell by 8.9 points to minus 1.1, its lowest score since the 2010 when the continent was battered by financial crises.
With investment a central cause of economic growth, the weak survey score will worry German policymakers during a tough patch.
The government predicts Germany’s economy will grow by just 0.5 per cent this year, compared to 1.5 per cent in 2018, which was considered weak.
“The continued negative trend in incoming orders in the German industry is likely to have reinforced the financial market experts’ pessimistic sentiment,” said ZEW president Achim Wambach.
He said an end to “uncertainty in the export-oriented sectors of the German economy is currently not in sight”.
Earlier this month official figures showed new factory orders plunged by 2.2 per cent in May compared to the previous month. This was far below the 0.1 per cent drop economists expected.
Trade tensions, weak demand from China, and new car emissions tests are among the factors that have hurt German manufacturing in 2019.
“The Iran conflict seems to be intensifying and the ongoing trade dispute between the USA and China is a burden not only to Chinese economic development,” said Wambach.
“Furthermore, no discernible progress has been made in the negotiations as to what Brexit will look like,” he said.