German analyst and investor sentiment fell in July to its lowest since April 2009 on concerns of weaker economic growth this year, a key survey showed today, sending the euro down against the dollar.
The Mannheim-based ZEW economic think tank's monthly forward-looking poll of economic sentiment tumbled to 21.2 from 28.7 in June.
The ZEW cited investor concerns about the fallout from the euro zone debt crisis and financial market turmoil as being behind the drop. The survey reinforced expectations that Germany is heading for a slowdown after a strong second quarter.
"We're in the process of reaching the peak of the economic cycle right now," said HSBC Trinkaus economist Thomas Amend, adding that a dip in global sentiment indicators could point to headwinds ahead for Germany's export industry.
"A further danger is that the banking sector hasn't emerged from the crisis. That could weigh on lending in the second half," he added.
A separate ZEW gauge of current conditions rose to 14.6 from -7.9 in June, surpassing expectations for a reading of -1.5.
Figures released last week showed German trade surged in May and industrial output jumped more than expected.
However, business sentiment fell slightly in May, as a deterioration in companies' expectations suggested they are worried by the euro zone crisis.
Despite the drop in investor morale, ZEW economist Michael Schroeder said expectations remained relatively high.
"There is no indication of a double-dip scenario from the results of this survey," he told reporters.
Supporting Mr Schroeder's comments, carmaker BMW raised its 2010 pre-tax profit and sales outlook today, citing improving conditions in international car markets.
"We think that the second quarter growth will have been very strong," said Commerzbank economist Ralph Solveen. "It's unlikely, though, that this pace will continue into the third and fourth quarters. Things will slow down a bit." The ZEW index was based on a survey of 287 analysts and investors and conducted between June 28th and July 12th, ZEW said.
Reuters