German economic sentiment collapses in October

14 October 2008 16:41  [Source: ICIS news]

TORONTO (ICIS news)--German economic sentiment has collapsed in October as the financial crisis worsened the outlook considerably, the country’s ZEW Institute for European Economic Research said on Tuesday.

 

The institute’s indicator of economic expectations for Germany dropped by 21.9 points in October, from minus 41.1 points to minus 63.0 points, which is well below its historical average of 27.5 points.

 

“The concerns of the financial market experts that the crisis on the financial markets might spill over to the real economy increased this month,” said ZEW president Wolfgang Franz.

 

“The recently decided rescue package of the German government should, however, help to stabilise the situation,” he added.

 

Germany’s government pledged on Monday to provide almost €500bn ($685bn) to help the country's banks and provide loan guarantees.

 

Apart from the financial sector, export-oriented industries would be hit hard by the crisis, said Mannheim-based ZEW.

 

The institute also found that private households were expected to curb spending due to the high level of uncertainty.

 

The index is based on a survey of 256 analysts and was conducted from 29 September to 13 October.

 

ZEW did a separate analysis for 39 responses it received from analysts on 13 October, the day the German government put forward its rescue package for the banking sector.

 

While those 39 analysts also expected a decline in economic prospects, the decline was less pronounced when compared with the responses received before 13 October, the institute said.

 

Economic expectations for the eurozone also deteriorated in October, ZEW said.

 

The institute's eurozone indicator for the month declined by 21.8 points, to minus 62.7 points.

 

In related news, German machinery and equipment makers -- an important export industry -- said on Tuesday they expected growth to stagnate in 2009 as orders were slowing down markedly.

 

Domestic orders for new machinery and equipment were down 2% in the May-August period from a year earlier, while export orders fell 12%, according to industry group VDMA.

 

In the second quarter, Germany's economy shrank 0.5% from the first quarter.

 

($1 = €0.74)

 

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By: Stefan Baumgarten
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