(Bloomberg) -- Investor confidence in Germany’s economic outlook worsened for a fourth month in July after a string of disappointing figures raised recession risks.
The ZEW index measuring expectations for the next six months plunged to minus 44.1, the lowest level since 2011. A gauge measuring current conditions also declined.
Europe’s largest economy probably contracted in the second quarter as slower global growth and uncertainty from a U.S.-China trade war weighed on demand. Since then, business expectations have slipped further to the lowest level in a decade, and surveys point to a deepening slump in manufacturing.
“The most recent escalation in the trade dispute between the U.S. and China, the risk of competitive devaluations, and the increased likelihood of a no-deal Brexit place additional pressure on the already weak economic growth,” ZEW President Achim Wambach said in a statement. “This will most likely put a further strain on the development of German exports and industrial production.”
What Bloomberg’s Economists Say
“Today’s below-consensus ZEW expectations figures, which have a lead on actual GDP, suggest a material further deterioration in growth momentum may be coming later this year.”
--Jamie Rush.Read the full GERMANY INSTANT REACT
Major companies including Continental, Lufthansa and Daimler have all slashed their outlooks in a warning that momentum might slip further. Deteriorating growth prospects -- Germany is forecast to expand a mere 0.6% this year -- have fueled calls for more fiscal stimulus.
So far the government has been reluctant though. Chancellor Angela Merkel “has never left any room for doubt” that she stands by the goal of a balanced budget, her chief spokesman, Steffen Seibert, said on Monday, when asked whether the administration was considering issuing new debt to fund environmental projects.
At the European Central Bank, policy makers have indicated they’re prepared to provide more monetary support to prop up the euro-area economy. Interest-rate cuts and asset purchases could be announced as soon as September.