German investor sentiment worsened by more than expected this month due to the global financial crisis, though a banking sector rescue package should buoy morale, a closely watched survey showed today.
The ZEW economic research institute's gauge of expectations for Germany, based on a survey of 256 analysts and investors, fell to -63.0 from -41.1 in September, ZEW said. A Reuters poll of economists had pointed to a reading of -51.1.
ZEW conducted the survey from September 29th to October 13th.
"A separate analysis was made for 39 answers that came in on October 13th, the day on which the German government decided in favour of a rescue package for the German banking sector," ZEW said in a statement.
"It shows that the decline of the economic expectations for Germany was less pronounced after the decision on the rescue package was made," the institute added.
A separate gauge of analysts' assessment of current conditions fell to -35.9 in October, the lowest since Dec. 2005, from -1.0 the previous month, ZEW said. The consensus forecast in the Reuters poll was for -15.0.
"In all, there is nothing here to prevent aggressive policy loosening by the ECB," said Jennifer McKeown at Capital Economics in London.
The financial turmoil has weighed on the business environment in Germany, Europe's largest economy, where corporate sentiment deteriorated in September to its lowest level since May 2005.
In a sign German companies are suffering from a weaker global economy, carmaker BMW said last Friday it would temporarily halt output at some German plants given the sharp drop in demand in key car markets.