Germany Expectations Current Conditions
————————————————————-
November: -15.7 +5.4

MNI survey median: -11.0 +8.0
MNI survey range: -19.5 to -5.0 +1.0 to +13.0

October: -11.5 +10.0
—

FRANKFURT (MNI) – Pessimism among investors toward Germany’s
medium-term outlook unexpectedly rose in November, while their view of
the current situation also worsened, the Centre of European Economic
Research (ZEW)’s sentiment survey showed on Tuesday.

Following two months of increases, the ZEW’s economic sentiment
index fell to -15.7 from -11.5 in October. The median forecast of
analysts had been for a half-point improvement, though individual
projections varied widely.

ZEW President Wolfgang Franz noted that economic expectations have
been moving “more or less sideways” in negative territory since the
middle of the year. ZEW’s current conditions index also fell to +5.4
from +10.0 in October.

“Prevailing recessionary developments in the Eurozone impact the
German economy via foreign trade and a lack of confidence. This is
likely to be a burden for economic growth in Germany during the next six
months,” Franz said in a press release.

Domestic demand by contrast has held up well and is likely to
remain a pillar of support for the economy. Private consumption should
continue to benefit from a stable labour market, low inflation and wage
growth, while increasing tax revenues and a falling public deficit
should allow the government to avoid crippling austerity measures that
other states have been forced to implement.

However, foreign trade – once the engine of growth – could weigh on
activity in the near term, as exports suffer from waning demand, while
private consumption should support imports.

The October factory PMI survey showed new export orders falling at
their second-fastest pace in three and a half years (40.7). Looking
ahead, an Ifo institute poll noted export expectations declining to
their lowest level since mid-2009.

Most analysts estimate that GDP growth slowed further in 3Q and
project stagnation or a mild decline for 4Q. Preliminary 3Q GDP data
will be released Thursday.

“A series of indicators signal that [the economy] in the second
half [of 2012] grew only slightly and that the economic momentum is
weakening further,” the government’s council of independent economic
advisers said in a recent report. “In the year 2013 the situation will
not brighten markedly.”

Bundesbank President Jens Weidmann is also not very optimistic for
2013. “Demand from abroad is diminishing” and companies are growing more
hesitant on hiring, he pointed out. As a consequence, the economy is
likely to stagnate in first part of next year.

The European Commission forecasts German GDP growth to slow to
+0.8% on average both this year and the next. For 2014, the Commission
sees GDP up 2.0%.

The ZEW economic sentiment indicator for the Eurozone as a whole
was down to -2.6 in November from -1.4 in October, while the current
situation index dropped to -80.3 from -79.4.

Earlier this month, the Sentix Eurozone investor confidence
indicator rose for the third consecutive month in November on the back
of improvements in both the six-month outlook and the current situation.

— Frankfurt bureau: +49 69 720 142; email: twailoo@mni-news.com —

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