German investor sentiment deteriorates in December - ZEW

German investor sentiment deteriorated in December amid Covid restrictions and supply issues, according to a survey released on Tuesday by the ZEW Center for European Economic Research in Mannheim.

The headline ZEW investor expectations index fell to 29.9 from 31.7 in November. Meanwhile, the current situation index declined to -7.4 in December from 12.5 the month before. This was the first time since June that the situation indicator has been in negative territory again.

ZEW President Professor Achim Wambach said: "The German economy is suffering noticeably from the latest developments in the Covid-19 pandemic. Persisting supply bottlenecks are weighing on production and retail trade. The decline in economic expectations shows that hopes for much stronger growth in the next six months are fading.

"Especially the earnings expectations of export-oriented and consumer-related industries are assessed more negatively."

Melanie Debono, senior Europe economist at Pantheon Macroeconomics, said: "Today’s ZEW shows that most analysts agree with us that German GDP growth is now slowing sharply. Indeed, current conditions continued to deteriorate; the index turned negative again for the first time in six months.

"Commentators for ZEW highlighted that the fall in the expectations index suggests hopes for stronger growth in the next six months have deteriorated, probably because the impact of the recent surge in virus cases, and associated restrictions, outweighs that from indicative signs of easing supply side issues, namely via falling shipping costs. We look for German GDP growth to have slowed to just 0.4% this quarter, and to average around that throughout 2022."