Investor sentiment in Germany’s economy deteriorated on concern about the banking sector and elevated inflation.
(Bloomberg) — Investor sentiment in Germany’s economy deteriorated on concern about the banking sector and elevated inflation.
The ZEW institute’s gauge of expectations dropped to 4.1 in April from 13 the previous month. That’s worse than the 15.6 median estimate in a Bloomberg survey of economists.
At the same time, a gauge of current conditions rose more than anticipated.
“Experts expect banks to be more cautious in granting loans,” ZEW President Achim Wambach said Tuesday in a statement. “The still-high inflation rates and the internationally restrictive monetary policy are also weighing on the economy.”
On the positive side, he said the danger of an “acute” international financial-market crisis seems to have been averted.
“Earnings expectations for banks and insurance companies have improved compared to the previous month and are once again clearly in positive territory,” Wambach said.
The data showed March’s bigger-than-expected pullback — brought about by the financial-sector turmoil that saw Credit Suisse Group AG taken over by UBS Group AG in neighboring Switzerland — wasn’t a temporary setback.
Defying the turbulence, Germany’s business outlook unexpectedly improved to the highest in more than a year that same month, according to a survey by the Ifo institute.
There are headwinds: The European Central Bank is likely to raise interest rates in May and several officials refuse to rule out another big increase.
Data due next week will reveal whether Germany’s efforts to recalibrate energy supplies after Russia’s invasion of Ukraine helped it to avoid a winter recession.
Either way, the growth outlook remains subdued.
“No significant improvement in the economic situation is to be expected in the next six months,” ZEW said in its statement.
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