Investors are growing increasingly pessimistic about Germany’s economic outlook, after the ZEW report, which measures investor confidence, worsened for a fourth straight month.
The German economy is likely to have contracted in the second quarter, as sluggish global growth and havoc-wreaking US-China trade war continued to dent confidence in Europe’s largest economy.
The ZEW report shows confidence at its lowest level since 2011, highly indicative of a major slump being experienced by its manufacturing industry.
Following the release of the report, German stocks continued a sell-off.
ZEW President Achimn Wambach said of the report:
The ZEW Indicator of Economic Sentiment points to a significant deterioration in the outlook for the German economy. The most recent escalation in the trade dispute between the US and China, the risk of competitive devaluations, and the increased likelihood of a no-deal Brexit place additional pressure on the already weak economic growth. This will most likely put a further strain on the development of German exports and industrial production.
The trend is only likely to continue downwards as major German companies such as Lufthansa, Continental and Daimler all indicated a decrease in confidence in the country’s economy.
Calls for action by the German government in the form of fiscal stimulus have so far fallen on deaf ears.
Angela Merkel’s chief spokesperson, Steffen Seibert, claims she has never left any room for doubt and is firm in her belief that a balanced budget is necessary for a stable economy. This was in response to a question about whether the government was willing to advance environmental projects through the issuance of new debt.
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