German investor confidence declines for sixth month
Wednesday, 17 March 2010
FRANKFURT, Mar 16 (Bloomberg): German investor confidence dropped for a sixth month in March amid signs the economy is struggling to expand and as Greece's fiscal crisis shakes financial markets.
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations slipped to 44.5 from 45.1 in February. Economists had expected it to fall to 43.5, the median of 41 forecasts in a survey shows. The report aims to predict developments six months ahead.
Latest data suggest Germany's economy, which failed to grow in the final three months of 2009, may continue to stagnate this quarter as the coldest winter in 14 years curbs construction and keeps consumers at home. Concern that Greece won't be able to rein in its soaring budget deficit has also undermined confidence in the euro area. Still, Germany's benchmark DAX share index has rallied 7 per cent in the past three weeks.
"Yes, the first quarter will be bad because of the weather, but the overall outlook is very healthy," said Carsten Brzeski, an economist at ING Group in Brussels. Today's report shows "more of a sideways move than a downward shift," he said.
ZEW's gauge of current economic conditions rose to minus 51.9 from minus 54.8 last month. The euro initially rose on the report before retreating to $1.3683 at 11:36 am in Frankfurt, little changed.
While data last week showed German exports unexpectedly plunged 6.3 per cent in January, ending a four-month streak of gains, the euro's 4.2 per cent drop against the dollar this year may bolster foreign sales.
"I see a risk that we will see a very weak quarter or even a slight minus" in gross domestic product, Bundesbank President Axel Weber said on March 9. "But then the second and third quarters would be even stronger. The recovery process that began in summer 2009 is essentially intact."
The central bank forecasts the German economy, Europe's largest, will grow 1.6 per cent this year. It shrank 5 per cent in 2009, the most since World War II.
Volkswagen AG, Europe's biggest automaker, said sport-utility vehicle and commercial-van sales rose 27 per cent in the first two months of 2010, outpacing industry growth of 20 per cent. Chief Executive Officer Martin Winterkorn said on March 11 that the company has "a good tailwind" in China, Brazil and the US.
Germany relies on exports for growth. Household spending rose just 0.4 per cent in 2009, driven by the government's "cash-for-clunkers" programme, which expired in September.
Germany has dismissed criticism by French Finance Minister Christine Lagarde that it needs to do more to boost the exports of euro-area partners by encouraging domestic consumption.
Countries that run trade surpluses have a responsibility to "harmonise" their economies with partners to cut imbalances within the bloc, Lagarde said this week.
German Economy Minister Rainer Bruederle told Handelsblatt newspaper that Greece's example has shown "there is no way to get around" becoming more competitive and pursuing fiscal reforms.
Greece is undertaking an austerity program that includes public-sector wage cuts and tax increases in an effort to reduce a budget deficit of 12.7 per cent of GDP, over four times the European Union limit.
European finance ministers have agreed on a strategy for unprecedented emergency loans to Greece if its plan fails, Luxembourg's Jean-Claude Juncker told reporters in Brussels last night.
"Greece is weighing on investors' minds," said Colin Ellis, an economist at Daiwa Capital Markets Europe Ltd in London. People are also realising that the recovery in Germany "is going to be slower and bumpier than they first thought," he said.
German business confidence unexpectedly fell for the first time in 11 months in February. E.ON AG, Germany's largest utility, plans to invest less each year through 2012 to save cash after debt surged and energy demand dropped.
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations slipped to 44.5 from 45.1 in February. Economists had expected it to fall to 43.5, the median of 41 forecasts in a survey shows. The report aims to predict developments six months ahead.
Latest data suggest Germany's economy, which failed to grow in the final three months of 2009, may continue to stagnate this quarter as the coldest winter in 14 years curbs construction and keeps consumers at home. Concern that Greece won't be able to rein in its soaring budget deficit has also undermined confidence in the euro area. Still, Germany's benchmark DAX share index has rallied 7 per cent in the past three weeks.
"Yes, the first quarter will be bad because of the weather, but the overall outlook is very healthy," said Carsten Brzeski, an economist at ING Group in Brussels. Today's report shows "more of a sideways move than a downward shift," he said.
ZEW's gauge of current economic conditions rose to minus 51.9 from minus 54.8 last month. The euro initially rose on the report before retreating to $1.3683 at 11:36 am in Frankfurt, little changed.
While data last week showed German exports unexpectedly plunged 6.3 per cent in January, ending a four-month streak of gains, the euro's 4.2 per cent drop against the dollar this year may bolster foreign sales.
"I see a risk that we will see a very weak quarter or even a slight minus" in gross domestic product, Bundesbank President Axel Weber said on March 9. "But then the second and third quarters would be even stronger. The recovery process that began in summer 2009 is essentially intact."
The central bank forecasts the German economy, Europe's largest, will grow 1.6 per cent this year. It shrank 5 per cent in 2009, the most since World War II.
Volkswagen AG, Europe's biggest automaker, said sport-utility vehicle and commercial-van sales rose 27 per cent in the first two months of 2010, outpacing industry growth of 20 per cent. Chief Executive Officer Martin Winterkorn said on March 11 that the company has "a good tailwind" in China, Brazil and the US.
Germany relies on exports for growth. Household spending rose just 0.4 per cent in 2009, driven by the government's "cash-for-clunkers" programme, which expired in September.
Germany has dismissed criticism by French Finance Minister Christine Lagarde that it needs to do more to boost the exports of euro-area partners by encouraging domestic consumption.
Countries that run trade surpluses have a responsibility to "harmonise" their economies with partners to cut imbalances within the bloc, Lagarde said this week.
German Economy Minister Rainer Bruederle told Handelsblatt newspaper that Greece's example has shown "there is no way to get around" becoming more competitive and pursuing fiscal reforms.
Greece is undertaking an austerity program that includes public-sector wage cuts and tax increases in an effort to reduce a budget deficit of 12.7 per cent of GDP, over four times the European Union limit.
European finance ministers have agreed on a strategy for unprecedented emergency loans to Greece if its plan fails, Luxembourg's Jean-Claude Juncker told reporters in Brussels last night.
"Greece is weighing on investors' minds," said Colin Ellis, an economist at Daiwa Capital Markets Europe Ltd in London. People are also realising that the recovery in Germany "is going to be slower and bumpier than they first thought," he said.
German business confidence unexpectedly fell for the first time in 11 months in February. E.ON AG, Germany's largest utility, plans to invest less each year through 2012 to save cash after debt surged and energy demand dropped.