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The German ZEW Economic Sentiment Index slumped to 63.3 from 79.8, its lowest since January and below all estimates in a recent Bloomberg Survey. The index looks at the six-month economic outlook by surveying about 350 German institutional investors and analysts. A lower than expected reading for the EU’s largest economy should be taken as a negative sign for the Eurozone.
The reading has failed to hit its forecast target three times in the last five months as Germany attempts to kickstart its pandemic-stricken economy.
But ZEW president Professor Achim Wambach signalled it wasn’t all doom and gloom for Berlin.
“Germany has clearly overcome the coronavirus-related decline,” he said.
Although the expectations index “has once again fallen significantly, it is still at a very high level”, he added.
Recent economic data has pointed towards a rocky recovery for Germany, with manufacturers unexpectedly being hit by a decline in demand in May.
This was blamed on a weak export market for the country’s prized automobile industry.
German businesses are battling unprecedented supply-chain issues as a result of a surge in global activity.
Following the end of Covid lockdowns across the world, prices have been driven up as firms jostle for supplies of raw materials and components.
German industrial output fell in May, according to new data published today.
It shows that a semiconductor supply bottleneck is slowing down the recovery of Europe’s largest economy.
The Federal Statistics Office said industrial output slumped by 0.3 percent on the month after an upwardly revised decline of 0.3 percent in April.
A Reuters poll had forecast a rise of 0.5 percent.
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It said the forecast for the economy remained positive due to strong demand and optimistic export expectations.
Thomas Gitzel, an economist at VP bank, said the supply crunch slowing down production might temper some economists’ growth forecasts.
“Economists who started the year with an overly optimistic growth forecast will have to apply the red pen,” he said.
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