German ZEW Remains Unchanged

The German investor confidence for the month of September remained the same as the previous month after the released data implied that German economic activity was experiencing a slowdown. The ZEW Center for European Economic Research in Mannheim said it's index of analysts and investors forecasts, which is used to project the economic developments in six months before the date, is now fixed at 0.5. Economists surveyed by Bloomberg had forecasted an increase to 2.5, as the German economy currently being affected by subdued global growth, record low unemployment and borrowing costs, and the issues arising from the UK's decision to exit the EU, all these factors currently affect the overall German economic outlook. The fall in Business confidence for the month of August is the highest since 2012 and a measure for private sector activity revealed a slump to a 15 month low.

“The current ambiguity of economic impulses from Germany and abroad means that forecasts for the next few months are difficult,” ZEW President Achim Wambach said in the statement.“German exports, particularly to non-EU countries, as well as industrial production figures, have disappointed. By contrast, the economic environment in the European Union is improving.”

The ZEW index is now significantly below the levels it orbited during the second quarter of the current year despite the market uncertainty that currently exists in the UK after the shock arising from the Brexit decision has been overcome. The situation component is now marginally weaker at 55.1 from its previous value of 57.6.

There was also a marginal weakening in the outlook for inflation expectations as it reflected lesser confidence that the rate of inflation would grow, there was however an increase in the anticipation for the long term inflation rate. The ZEW data will most likely sustain the underlying worries surrounding the overall German fundamental outlook after the weaker than expected services sector PMI which is actually the worst since the start of 2015 and the industrial production data.

There will also be some fear concerning the general performance of major export industries. As some rumours currently imply that political tensions within Germany are negatively affecting business confidence as consumers are now raising their precautionary savings.

Despite cooling confidence, demand for German equities has bolstered the country’s benchmark stock index, which became the first among major euro area counterparts this month to recover its losses for the year. A survey by Bank of America Corp. found that European fund managers are the most overweight on the country’s equities since February 2015, while a separate survey shows private investors are the most bullish on the market since at least July.