Germany’s economic confidence deteriorated sharply to a one-and-a-half-year low in March on fears of US led trade conflicts, survey data from the Mannheim-based think tank ZEW showed Tuesday.
The ZEW Indicator of Economic Sentiment dropped more-than-expected to 5.1 in March from 17.8 in February. This was the lowest score since September 2016 and well below the expected level of 13.0.
The current conditions index came in at 90.7 in March versus 92.3 in the previous month. The reading was seen easing moderately to 90.
Strong current assessment and weak expectations are a good reminder that strong German growth should not be taken for granted, Carsten Brzeski, an ING economist, noted.
“Concerns over a US-led global trade conflict have made the experts more cautious in their prognoses,” ZEW President Achim Wambach said.
Further, he said the strong euro is also hampering the economic outlook for Germany, a nation reliant on exports.
“Combined with the experts’ continued positive assessment of the current situation, however, the outlook is still largely positive,” Wambach added.
March’s sharp decline in the ZEW measure of German investor sentiment highlights the risks to the economy, Stephen Brown, an economist at Capital Economics, said. While Germany would be hit harder than most by a trade war, for now the outlook is positive.
The survey showed that the economic confidence index for the euro area declined significantly by 15.9 to 13.4 points in March. At the same time, the current conditions index slid moderately by 1.5 points to 56.2 in March.