German investor confidence below estimates amid lacklustre growth; Euro declines

German investor confidence below estimates amid lacklustre growth; Euro declines

19 May 2015, 13:25
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German investor confidence fell below analysts' estimates after growth in Europe’s largest economy slowed in the first quarter of 2015.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, fell to 41.9 in May from 53.3 in April - the lowest level since December. Economists surveyed by Bloomberg had forecast a decline to 49.

According to ZEW, a gauge of current conditions fell to 65.7 in May from 70.2 the previous month.

While growth in the euro area expanded at the fastest rate in five years, Germany was not its driver, as it had been traditionally. On the contrary, in the first quarter the country's gross domestic product (GDP) grew by 0.3 percent, compared with the previous three months while analysts had expected growth of up to 0.9 percent.

The pickup was led by France, Italy and Spain.

The Bundesbank sees momentum in German manufacturing sluggish in the upcoming months, but it also sees consumer spending supporting the economic recovery.

Aline Schuiling, senior economist at ABN Amro Bank NV in Amsterdam, said that the dip is possibly related to Greek fears and the rise in bond yields during the recent weeks. “Domestic economic fundamentals are strong, employment is growing, real wage growth has jumped higher and corporate profitability has improved as well.”

“Only a small number of survey participants actually expect a deterioration of the economic situation,” ZEW President Clemens Fuest said in a statement.

Meanwhile, EUR/USD touched one-week lows of 1.1160 and was last at 1.1196, down 1.04% for the day.

While the euro was impacted by the ZEW report, it was also hit by senior ECB policymaker Benoit Coeure's comments who said the bank is planning to speed up its bond-buying stimulus plan before the summer so that to avoid the “notably lower market liquidity” in late July and August.

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