German investor confidence drops again in January amid expectations of slow recovery

German investor confidence decreases again

FRANKFURT — German investor confidence slipped for the fifth month in a row in February amid dim prospects for the nation’s retail, consumer goods, steel and chemical sectors, a closely watched survey showed Tuesday.

The confidence index of the ZEW Institute showed investors’ outlook for the next six months dropped to 45.1 points from 47.2 points in January. The survey is viewed by many as an accurate barometer for the economic outlook in Germany, Europe’s biggest economy.

ZEW, or the Center for European Economic Research, based in Mannheim, said that despite the decline, the index remains well above the historical average of 27.1 points.

The index hit a 3 1/2-year high of 57.7 points in September.

The ZEW said it expects the economy to recover slowly from the current crisis within the next six months, but that prospects for the retail, consumer goods and auto sectors remain poor. Participants also voiced pessimism about the steel and chemical sectors in Europe’s biggest economy, the ZEW said.

“Though we have passed through the deepest valleys of the depression, the worries about the labor market, budget deficits and the euro have not lessened,” ZEW President Wolfgang Franz said in the report.

The ZEW index’s drop indicates “a further adjustment of financial analysts’ expectations of the economic outlook,” said Carsten Brzeski, an analyst at ING.

“Today’s correction of the ZEW indicator reflects the return of risk aversion in financial markets and the fiscal problems in Greece and other euro zone countries. Still, the pure macro-economic impact from Greece on the German economy through the trade channel can be neglected. Exports to Greece account for less than 1 percent of total German exports,” Brzeski said.

The ZEW said economic expectations in the 16 countries that share the euro currency fell sharply to 40.2 points from 46.4 points in January.

The euro and markets have lost ground recently over deepening worries about swelling budget deficits in Greece and other weak economies in the region.

On Monday, eurozone governments did not commit to a bailout of Greece, but warned that it will need to take extra measures if current spending cutbacks don’t bring its massive deficit down. Greece will have to report on its progress by mid-March.

The European finance ministers continued their summit in Brussels Tuesday, with investors looking out for any more details about how Greece might be supported through the crisis.

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