Expectations / Current conditions
October: -48.3 +38.4

MNI survey
median -45.0 +39.8
range -35.0 to -48.3 +33.6 to +43.6

September: -43.3 +43.6
—

FRANKFURT (MNI) – Investors’ six-month outlook for the German
economy eroded more than generally expected in October, falling for the
eighth month in a row, while their view of the current situation also
fell back, the Centre for Economic Research (ZEW) reported on Tuesday.

After a 59.0-point slide from a peak in February, ZEW’s
expectations index fell another five points in October to -48.3, its
lowest level since November 2008 and 73.6 points below the historical
average.

The ZEW said the main driving force behind the fall was weak German
domestic economic activity.

“Due to weak retail sales and industrial new orders, the financial
market experts may see their fears come true that the current government
debt crisis might cause German companies and consumers to postpone
investments and consumption spending,” it said.

The current situation index fell 5.2 points to 38.4 in October,
falling for the third consecutive month, though remaining “still
markedly positive”.

ZEW senior researcher Markus Kappler said Germany might already be
in a technical recession, with growth in industrial production expected
to turn negative by 4Q.

He said the number of respondents who expected interest rates to
fall remained in a minority but had increased for the third successive
month.

In its latest monthly bulletin, the Bundesbank said that German GDP
in the third quarter most likely still grew significantly but that the
economic outlook for the next two quarters has further clouded.

It also noted sentiment in the manufacturing sector has further
deteriorated and foreign orders have markedly declined.

On Wednesday last week, German Economics Minister Philipp Roesler
said that the government will likely revise downward its economic growth
forecasts for Germany made in April.

The economics ministry is scheduled to release the government’s new
growth forecasts on October 20. In April, the government had forecast
German GDP growth of 2.6% in 2011 and of 1.8% in 2012.

Markit’s German Manufacturing PMI hit a two-year low in September.
The survey found manufacturers in Germany indicated a decline in new
order volumes for the third month running last month. The latest
reduction was the fastest since June 2009.

The recent decline in foreign orders illustrates the headwinds
hitting Germany, as it faces weak demand from a slowing global economy
and morale-draining austerity measures across the Eurozone.

For the Eurozone as a whole, investors’ view of medium-term
prospects slipped 6.6 points to -51.2. The drop in the current
situation component was more pronounced at 3.8 points to -31.7.

Earlier this month, Sentix reported that its investor confidence
indicator for the Eurozone fell a further 1.9 points to -15.4, its
lowest value since August 2009.

The survey found investors showed themselves to be just as
offered by central banks and politics.

— Frankfurt bureau: +49-69-720 142; email: frankfurt@marketnews.com —

[TOPICS: M$G$$$,M$X$$$,MAGDA$,M$XDS$,MT$$$$]