German Investor Morale Slumps

German investor confidence fell sharply in August, amid growing concerns about the nation’s economic outlook and following the diesel vehicle scandal that has engulfed the nation’s car industry, according to a key indicator released Tuesday.

The Center for European Economic Research, or ZEW, said its closely watched monthly indicator for Europe’s biggest economy fell more than forecast, to 10 points this month, from a July reading of 17.5, Alliance News reported.

Analysts had expected the indicator, based on a survey of 213 institutional investors and analysts, would drop to 15 points this month. Any number above zero means the number of respondents who see growth ahead is higher than the number that sees a decline.

“The significant decrease of the ZEW economic sentiment indicator reflects the high degree of nervousness over the future path of growth in Germany,” said ZEW chief Achim Wambach.

“Both weaker-than-expected German exports, as well as the widening scandal in the German automobile sector, have helped contribute to this situation,” he said.

ZEW said, the general outlook for Europe’s largest economy remains “stable” and relatively solid.

But the group of financial analysts and investors polled by the ZEW has remained upbeat about Germany’s current economic situation. The corresponding ZEW measure rose to 86.7 points in August from 86.4 points in July.

Most forecasters say that the German economy should maintain its solid performance in the second half of the year.

“The strong economic upturn in the German economy is expected to continue in the third quarter, with industrial output probably continuing to play an important role, thanks to a substantial expansion in exports,” the country’s central bank said Monday.

Official data last week showed that the German economy grew by 0.6% in quarterly terms, or 2.5% in annualized terms, in the second quarter, following annualized growth of 2.9% in the first quarter.

A separate gauge that tracks experts’ views on the outlook for the eurozone also fell back, by 6.3 points to 29.3. Yet the sub-index linked to their views on the current situation climbed to its highest level since January 2008. In August it rose by 9.7 points to 38.4.

Of the expectations indices compiled by the institute for some of Germany’s main trading partners, the only ones which did not decline last month were those for Japan, which was flat, and that for Italy which climbed by 1.2 points.

There was also a large increase in the sub-index which measures expectations for a weaker euro/dollar exchange rate, of 13.9 to 26.6.