German economic sentiment drops in August

17 August 2010 15:43  [Source: ICIS news]

TORONTO (ICIS)--A key German economic sentiment indicator dropped in August in a sign that the pace of growth in Europe’s largest economy will likely slow down after a strong second quarter, a research institute said on Tuesday.

The Mannheim-based ZEW centre for European economic research said its economic expectations indicator for Germany plunged 7.2 points in August to 14.0 points, the fourth monthly decline in a row.

The decrease in the indicator, which is based on a monthly survey of 284 analysts, showed that Germany's “enormous growth” in the second quarter was unlikely to continue through the rest of the year, ZEW said. Germany’s economy grew by a record 2.2% in the second quarter from the first.

ZEW pointed to Germany’s dependence on exports and “major risks” for economic growth from weak development abroad - especially in the eurozone and the US.

Said ZEW president Wolfgang Franz: "Given that economic growth worldwide loses momentum, the euphoria about the growth rates in some branches makes financial market experts feel uneasy.

“Anyway, high growth rates are always easier to realise from a low base level, though with decreasing dynamics," he added.

Meanwhile, Germany’s chemical production is expected to increase by 8.5% this year, after a 10% decline in 2009 from 2008.

Second-half chemical production growth would slow down compared with the 13% year-over-year growth in the first six months of 2010, partly due to lower second-half growth in the EU, which is the largest export market for Germany’s chemical producers, according to the most recent projections by trade group VCI.

Germany’s central bank, the Bundesbank, expects the country’s GDP to increase by 1.9% this year, after a 4.9% decline in 2009 from 2008.

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