German Investor Confidence Plummets On Coronavirus Concerns

Germany’s economic sentiment logged a steep fall in February as investors increasingly grew concerned about the impact of the coronavirus outbreak in China, results of a closely watched survey showed on Tuesday.

The investor confidence indicator slumped to 8.7 from 26.7 in January, survey results from the ZEW – Leibniz Centre for European Economic Research revealed. The latest score was the weakest since November, when it was -2.1.

The reading was much worse than the 21.5 economists had expected.
The current conditions index of the survey fell to -15.7 from -9.5 in January. Economists had forecast a score of -10.3.

“The feared negative effects of the Coronavirus epidemic in China on world trade have been causing a considerable decline of the ZEW Indicator of Economic Sentiment for Germany,” ZEW President Achim Wambach said.

Expectations regarding the development of the export-intensive sectors of the economy have dropped particularly sharply, he noted. Further, the German economy has remained weak at the end of 2019 and at the start of this year.

“Both the downward revision of the assessment of the economic situation and the downturn in expectations show clearly that economic development is rather fragile at the moment,” Wambach added.

The investor confidence index for Eurozone dropped sharply to 10.4 from 25.6 in January. Economists had forecast a reading of 30 for the month.

The current conditions index for Eurozone shed 0.4 points to minus 10.3 points.

The survey also showed that the indicator reflecting the inflation expectations for the eurozone dropped 13.7 points to 4.7 points.

Germany’s economy is set to remain sluggish in the first quarter of 2020, hurt by weak demand for exports and the supply disruptions caused by the coronavirus, or Covid-19, outbreak in China, Bundesbank said in its latest monthly report, released on Monday.

A pick up in the growth momentum in the biggest euro area economy is unlikely in the first quarter, the bank said.

Further, the coronavirus outbreak in China is a fresh risk for the German growth outlook, the bank added.

Official figures released last week showed that the German economy stagnated in the final three months of 2019, thanks to slower consumption and weaker exports. In the third quarter, the economy had grown 0.2 percent.

In the full year 2019, the economy grew 0.6 percent, expanding for a tenth year in a row, but the pace of growth was the slowest in six years.

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