(Reuters) – Investor sentiment in Germany has fallen much more sharply than expected since the start of August, a monthly survey by the Zew Institute of Economic Research showed on Tuesday.

Its index stood at 19.2 points, against 41.8 in July, while the Reuters consensus expected 32.0.

The economic situation indicator rose from -68.9 in July to -77.3 in August. The consensus was -75.0.

“The economic outlook is deteriorating,” notes Achim Wambach, president of the Zew Institute, who believes that the drop in exports in May, political uncertainty in France and the uncertain monetary policy trajectory of the European Central Bank (ECB) have contributed to the fall in investor morale.

Activity in the German industrial sector also remains under pressure, with industrial orders having been disappointing in May.

“This means that the German economy is dependent on private consumption, which will not be able to compensate for the weakness of the industrial sector to the point of strongly supporting growth,” notes Thomas Gitzel, chief economist at VP Bank.

Conversely, the perception of the current situation improved slightly, going from -73.8 in July to -68.9 in August.

Real incomes are rising and credit conditions are easing, suggesting an economic rebound, said Michael Herzum, an economist at Union Investment.

But this rebound will be limited, warns the economist. “The probable election of Donald Trump in November weighs on the German economy,” he concludes.

The rate cuts by the Federal Reserve expected by the markets are also considered encouraging, and do not suggest an economic turnaround in the United States, adds Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.

(Written by Miranda Murray, Maria Martinez, Klaus Lauer, Corentin Chappron, edited by Kate Entringer)

Copyright © 2024 Thomson Reuters