German Investor Confidence Drops in April: ZEW

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German investor confidence declined unexpectedly in April, falling for the first time since October amid a tepid outlook on the global economy.

The ZEW economic sentiment index – a measure of institutional investor sentiment in Germany – fell to 53.3 in April from 54.8 in March. A median estimate of economists called for an increase to 55.3.

April was the first time in six months the economic sentiment index had declined. Investors have grown relatively upbeat about the German and Eurozone recoveries, suggesting that the regional economy was improving following a disappointing 2014.

“The German economy is in good shape. A stable labour market and increasing wages are strengthening confidence and boosting consumption. However, the current weakness of the world economy is dampening export prospects and reducing the scope for further improvements of the economic situation in Germany,” ZEW President Professor Clemens Fuest said in a statement.

A separate gauge of current economic conditions soared to 70.2 in April from 55.1 in March, crushing expectations for 56.0. The reading suggests that the German economy made strong progress in the first quarter. The German government is expected to raise its economic outlook to 1.8 percent this year from its current estimate of 1.5 percent, according to Reuters.

Private sector analysts say the German economy could grow more than 2 percent in all of 2015, well above the 2014 rate of 1.6 percent.

The German government will release its preliminary estimate of first quarter GDP on May 13. The economy expanded 0.7 percent in the fourth quarter of 2014 and 1.4 percent annually.

The European Commission will also report on Eurozone GDP on May 13. The Eurozone economy rebounded 0.3 percent in the final three months of last year and 0.9 percent annually.

Investors gave a more favourable outlook for the Eurozone. The ZEW economic sentiment index for the euro area climbed to 64.8 from 62.4 in March. Economists forecast an increase to 63.7.

Later this week the GfK research institute will report on German consumer confidence, a forward-looking indicator of consumer sentiment. The CESifo Group will close out the week with a report on German business confidence. Both indicators are expected to show an improvement.