German ZEW economic confidence indicator falls fourth month in row

German Economy
German Economy

German economic confidence weakened for the fourth consecutive month in September as the global chip shortage as well as short supply of construction materials weighed on profit expectations, survey results from the ZEW – Leibniz Centre for European Economic Research showed on Tuesday.

The ZEW Indicator of Economic Sentiment for Germany fell more than expected, to 26.5 in September, from 40.4 in August. The expected level was 30.0.

The current reading suggests that, during the next six months, economic growth will only slightly be higher than its current rate, the institute said.

On the other hand, the current situation index improved by 2.6 points to 31.9 in September. The situation indicator has continuously increased since February 2021. Nonetheless, the reading was below the economists’ forecast of 34.0.

Although financial market experts expect further improvements of the economic situation during the next six months, the expected magnitude and the dynamics of the improvements have decreased considerably, ZEW President Achim Wambach said.

Wambach added that global chip shortage in the automobile sector and shortage of building material in the construction sector have caused a significant reduction in profit expectations for these sectors. This may have had a negative effect on economic expectations.

Further, the survey showed that economic confidence in the euro area also weakened for the fourth consecutive month in September. The corresponding index declined 11.6 points to 31.1.

By contrast, the indicator for the current economic situation climbed 7.9 points to a level of 22.5 points in September.

Inflation expectations continued their decline. The inflation indicator for the euro area plunged by 22.1 points, to 20.1 in September. The experts therefore expect inflation to decline during the next six months.

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