German economic sentiment deteriorates more than expected in December - ZEW
German economic sentiment deteriorated more than expected in December, according to the latest survey from the ZEW Center for European Economic Research in Mannheim.
The index of economic sentiment fell to 17.4 from 18.7 the month before, missing expectations for a smaller drop to 18.0.
However, the current situation index rose to 89.3 in December from 88.8, beating expectations for a decline to 88.5.
ZEW President Professor Achim Wambach said: "Overall, the outlook for the German economy in the coming six months remains positive. The current state of uncertainty surrounding the government formation in Germany has not had any significant impact on the assessment of the economic outlook. Financial market experts, however, expect to see negative effects resulting from this with regard to the Brexit negotiations as well as EU reforms."
Jennifer McKeown, chief European economist at Capital Economics, said the decline in the headline economic sentiment indicator more than reversed the previous month’s rise.
"But the fact that it is in positive territory means that a significant majority of investors still see economic conditions improving in the next six months from what is already a strong starting point. What’s more, perceptions of current conditions improved, leaving this index at its highest level since July 2011. So investors seem to agree with our view that October’s fall in industrial production was a blip.
"It is slightly concerning that sentiment has fallen and on the face of it this index suggests that German GDP growth will slow from Q3’s 2.8% to under 2%. But its relationship with growth has been weak in the past and more reliable business surveys such as the Ifo point to a further acceleration to come. Investor sentiment is likely to rise again once a coalition is formed next year, particularly since all of the major parties favour a fiscal boost."