(Bloomberg) -- Investor confidence in Germany’s economy plummeted to its lowest level since January following a disappointing run of data and the recent turmoil on global stock markets.
An expectations gauge compiled by the ZEW institute fell to 19.2 in August from 41.8 in July, a release Tuesday showed. That was much lower than the 34 forecast in a Bloomberg survey. An index of current conditions also declined more than expected.
“The economic outlook for Germany is breaking down,” ZEW President Achim Wambach said in a statement. “It is likely that economic expectations are still affected by high uncertainty, which is driven by ambiguous monetary policy, disappointing business data from the US economy and growing concerns over an escalation of the conflict in the Middle East.”
Figures published in recent weeks have painted a gloomy picture for Europe’s largest economy, where output unexpectedly shrank by 0.1% in the second quarter, and July readings of private-sector activity and the business climate offered little comfort.
“The economic crisis is becoming increasingly entrenched at a level of stagnation that frustrates everyone,” Vice Chancellor Robert Habeck said on Tuesday, adding that the situation might be “more rigid and persistent than repeatedly predicted.”
Speaking to reporters in Bremen, he highlighted that “the measures that have been taken so far aren’t sufficient to overcome the high interest rates, the lack of demand from abroad, but also the structural problems that we have in Germany.”
There have been some bright spots: Numbers last week showed factory orders and industrial production rose in June. But persistent weakness in exports underscore the country’s ongoing manufacturing woes, while bankruptcies are also on the rise.
Germany is facing the prospect of hardly any economic expansion this year, according to a Bloomberg survey of economists.
“The ZEW survey reinforces the impression that the German economy is not really getting on its feet,” said Robin Winkler, an economist at Deutsche Bank. He highlighted that the current assessment deteriorated again after a small improvement in the spring.
“What is even more worrying is the fact that the optimism in the economic expectations from the spring has completely evaporated,” Winkler said.
--With assistance from Kristian Siedenburg, Joel Rinneby and Petra Sorge.
(Updates with Habeck starting in fifth paragraph)
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