Trade tensions send German investor morale to six-year low

Published 10/07/2018 in Business News, Economy & Finance

Trade tensions send German investor morale to six-year low

BERLIN (Reuters) – The mood among German investors slumped in July to its lowest since August 2012, a survey showed on Tuesday, soured by concerns about escalating trade tensions with the United States.

The ZEW research institute said its monthly survey showed economic sentiment among investors fell to -24.7 from -16.1 in June. This compared with the Reuters consensus forecast for a reading of -18.0.

A separate gauge measuring investors’ assessment of the economy’s current conditions fell to 72.4 from 80.6 last month. The Reuters consensus forecast was for a reading of 78.2.

“The current survey period has been marked by great political uncertainty,” ZEW president Achim Wambach said. “In particular, fears over an escalation of the international trade war with the United States have dampened the economic outlook.”

Wambach added that positive news about industrial production, incoming orders and the German labor market had been “greatly overshadowed” by the anticipated negative effects of the tariff dispute on foreign trade.

Last week, Finance Minister Olaf Scholz warned that U.S. President Donald Trump’s decision to impose tariffs on goods imported from trade partners like China and the European Union would damage everyone.

The weak ZEW sentiment readout came despite a batch of positive data from Europe’s largest economy.

German exports rose by more than expected in May, when industrial output also bounced back, suggesting that German factories are gathering steam again after a weak start to the year.

Despite its exposure to uncertainties abroad, the German economy is getting impulses from consumption and construction.

“The economy is nowhere near falling off a cliff. Instead, it seems to be in a transition period toward growth normalization,” said ING economist Carsten Brzeski.

On Monday, Germany and China signed commercial accords worth some 20 billion euros ($23.44 billion), with their leaders reiterating commitments to a multilateral global trade order despite the looming trade war with the United States.

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