(Bloomberg) -- Investor confidence in Germany’s economy unexpectedly worsened in November after a spate of bad news from the country’s industry, the collapse of the three-party government and the election of Donald Trump.
An expectations index by the ZEW institute fell to 7.4 from 13.1 the previous month. Economists had forecast an increase to 13.2. A measure of current conditions also saw a surprise downturn in the survey, which was conducted Nov. 4-11.
“Economic expectations for Germany are influenced by Trump’s victory and the end of the coalition,” ZEW President Achim Wambach said Tuesday in a statement. “In the last few days of the survey period, however, more optimistic voices are also becoming increasingly vocal about the economic outlook for Germany due to the likelihood of early elections.”
The prospect for Europe’s biggest economy have darkened recently, with the manufacturing sector struggling to escape prolonged malaise and automakers in particular bracing for new threats including possible tariffs promised by US President-elect Trump.
With Volkswagen AG even discussing unprecedented plant closures in its home country, such troubles are also already hurting its supply chain, with parts makers Schaeffler AG and ZF Friedrichshafen AG planning thousands of job cuts.
Germany’s economy surprisingly dodged a recession by growing 0.2% in the third quarter, but the reading for the previous three months was revised down sharply and another full-year contraction still appears likely.
Adding to the gloom is heightened political uncertainty, after Chancellor Olaf Scholz’s shock dismissal of Finance Minister Christian Lindner last week. The governing Social Democrats and opposition lawmakers reached an agreement to hold an early federal election on Feb. 23, according to government officials familiar with the talks.
According to the Ifo Institute, German businesses are struggling to clinch orders. In October, 41.5% of companies reported that problem, up from 39.4% in July, it said on Monday. That’s the highest level since the global financial crisis in 2009.
“The lack of orders is continuing to hinder economic development in Germany,” said Klaus Wohlrabe, head of surveys at Ifo. “Hardly any industry has been spared.” In manufacturing, nearly half of all companies reported insufficient demand.
Some support for the economy is on the way from monetary policy, with the European Central Bank widely expected to lower borrowing costs for a fourth time this year at its rate meeting next month.
--With assistance from Joel Rinneby and Kristian Siedenburg.
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