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Survey: Germany Economic Confidence Falls

Survey: Germany Economic Confidence Falls
Tuesday May 24, 7:04 am ET
By Matt Moore, AP Business Writer

Survey Finds Germany Economic Confidence Falls in May on Fears of Global Engine Losing Steam

FRANKFURT, Germany (AP) -- German finance professionals' outlook for Europe's biggest economy fell sharply in May on fears that the global economic engine is losing steam, a closely watched survey showed Tuesday.

The ZEW institute's monthly index, a key economic indicator, dropped to 13.9 points from 20.1 in April, the second consecutive month of decline.

The index had risen steadily from December to March, and economists had expected the latest figure to show a rise to 21.9.

"The further deterioration in expectations is a matter of some concern," ZEW President Wolfgang Franz said. Germany's modest recovery after three years of stagnation has been driven by export growth, but consumer spending at home has remained weak amid persistently high unemployment.

Franz cited unsatisfactory "economic expertise" in public debate as one reason for uncertainty in Germany.

The economy is set to be a central battleground in campaigning for national elections likely to be held in September, with the opposition assailing the economic record of center-left Chancellor Gerhard Schroeder.

The ZEW survey came as the Organization for Economic Cooperation and Development said Germany's economy should continue to grow this year because of strong exports, but at a weaker pace than previously expected.

The Paris-based organization cut its growth forecast to 1 percent from 1.2 percent for 2005 and predicted growth of 1.6 percent for 2006.

But it warned that Europe's largest economy was vulnerable because most of its growth was dependent on foreign demand.

"With the resilience of domestic demand to negative shocks still low, the adverse impact of weaker world trade, a stronger euro or higher oil prices than assumed in these projections could be substantial," the OECD said.

Exports "should remain the main force driving the recovery this year and will also be a significant factor in 2006," it said.

The Mannheim-based ZEW, or Center for European Economic Research, said 298 investors and analysts participated in its monthly survey.


LINK: http://biz.yahoo.com/ap/050524/germany_economy.html?.v=1