German investor confidence fell to its weakest in 13 months in August, the ZEW institute said yesterday as it warned that analysts were increasingly worried oil prices could dampen economic growth.
The Mannheim-based think tank said its expectations indicator, based on a survey of around 300 analysts and institutional investors, dropped more than expected to 45.3, the lowest since 41.9 in July 2003, from 48.4 in July. ZEW's gauge of current conditions rose to minus 65.2 from minus 69.3 the previous month, slightly stronger than the forecast minus 69.0.
"The assessment by financial analysts coincides with fears that the momentum of the economic recovery in this country will weaken because uncertainty about the global economy and the oil price has mounted," said ZEW president Mr Wolfgang Franz.
Mr Andreas Rees, an economist at HVB Group in Munich, attributed the drop in the ZEW indicator to the surging oil prices and sliding stock markets.
"The downtrend in the ZEW indicator remains intact and points to a weakening of economic growth in Germany in the second half," Mr Rees said.
Oil prices have risen to record highs in all but one of the past 12 trading sessions, rising by about 7.5 per cent this month to around $45 (€36.45) to $46 a barrel and by some 40 per cent since the beginning of the year.
Analysts estimate that an oil price rise of $10 sustained over a period of 12 months could shave as much as four-tenths of a percentage point from Germany's annual growth rate.
Oil prices have soared due to a combination of surging demand from China, a lack of spare capacity outside Saudi Arabia, and political tensions in the Middle East. The ZEW survey provides a pointer to the possible direction of the Munich-based Ifo institute's key measure of business sentiment, due on August 26th.
Ifo's business climate index for July, based on a survey of around 7,000 companies, rose to 95.6 following two months of declines and the institute said the increase suggested Germany's moderate upswing would continue into the second half. - (Reuters)
