MANNHEIM, Germany, Nov 10 (Reuters) - German analyst and investor sentiment declined by more than expected in November, dropping to its lowest level in four months, a leading survey showed on Tuesday.
***********************************************************
KEY DATA
GERMANY NOV OCT
- economic sentiment 51.1 56.0
- current conditions -65.6 -72.2
MARKET REACTION
* The euro fell against the dollar after the data, dropping to $1.4975, while Bund futures hit a session high at 121.54.
- For the latest forex report double click on
- For the euro's exchange rate, double click on
- For latest euro debt report double click on
ANALYST COMMENT
CARSTEN BRZESKI, ING FINANCIAL MARKETS
'The German ZEW index dropped for the second consecutive month in November, indicating somewhat more realistic expectations of financial analysts on the economic outlook. At the same time, investors have become more positive on the current economic situation. The current assessment component increased for the sixth consecutive month to its highest level since January 2009.'
'Earlier enthusiasm is now gradually giving way to realism. However, this is no reason to worry. The outlook looks still good, even though the German economy is about to enter calmer waters. The latest numbers show that industrial production has taken over the baton from car-driven private consumption as the main growth driver. The turning inventory cycle, filling order books and accelerating global demand indicate that the positive momentum will continue in the fourth quarter.
'Despite all delight about the ongoing recovery, the biggest risk for the German economy and policymakers would be a return to business as usual. The export-driven recovery is all well and good but in order to transform the recovery into a boom, the German economy needs domestic demand. In this respect, tax cuts and investment incentives are the right way forward. Complacency would be a bad advisor.'
SIMON JUNKER, ECONOMIST, COMMERZBANK
'The correction on equities markets has made analysts more cautious. The economic picture is not changing, as we can see when we look at new orders and foreign trade, which have recently significantly gained. The recovery is clearly ongoing, and it will continue in the fourth quarter as well. If anything, growth will slow, but we do not expect a relapse. There will not be a braking effect due to corrections in partner countries, where export markets are not going so well. That is the reason for a weakening in the growth dynamic next year.'
ALINE SCHUILING, ECONOMIST, FORTIS
'The (ZEW) indicator tends to jump down quite sharply ... it is a significant decline, but it is not dramatic, and it is still above its long-term average, so it is still consistent with robust growth in GDP.'
'This shows, that since it rose for a long time and now has edged lower, this reflects that the German economy recovered very sharply from the economic and financial crisis and next year it will settle down at more moderate, but still robust growth rates.'
'For the third quarter, German growth will be about 0.9 percent Q/Q, which is above trend, but will then settle down to about 0.3 to 0.4 percent Q/Q.'
GILLES MOEC, ECONOMIST, DEUTSCHE BANK
'There might be sense things have moved a bit too fast and we may be heading for some troubled waters now and possibly higher longer time rates.'
'It is usual highly linked to financial market volatility so that might explain it a to some degree.'
BHF BANK ECONOMIST GERD HASSEL
'It is astonishing that the index has worsened. Apparently the mood on financial markets is sinking again after the economic development had previously been seen with euphoria. Realism is returning. That also has something to do with the fact that recent favourable developments were driven by fiscal policy measures. These are likely to end next year and dampen production. Already in the fourth quarter we can expectly only a slight growth in the economy due to the end of the scrapping bonus.'
BACKGROUND
- For a Nov 9 story on a record jump in German industrial output, please click on
- For a Nov 9 story on rising German exports, please click on
- For Nov 6 story on the latest rise in German manufacturing orders, please click on
- For Nov 6 story on latest German tax estimates, please click on
- For Oct 29 story on falling German unemployment, please click on
- For Oct 29 story on declining German engineering orders, please click on
- For Oct 28 story on flat October consumer prices, please click on
(Reporting by Frankfurt Newsroom) Keywords: GERMANY ZEW/ (frankfurt.newsroom@thomsonreuters.com; +49 (0)69 7565 1209) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
***********************************************************
KEY DATA
GERMANY NOV OCT
- economic sentiment 51.1 56.0
- current conditions -65.6 -72.2
MARKET REACTION
* The euro fell against the dollar after the data, dropping to $1.4975, while Bund futures hit a session high at 121.54.
- For the latest forex report double click on
- For the euro's exchange rate, double click on
- For latest euro debt report double click on
ANALYST COMMENT
CARSTEN BRZESKI, ING FINANCIAL MARKETS
'The German ZEW index dropped for the second consecutive month in November, indicating somewhat more realistic expectations of financial analysts on the economic outlook. At the same time, investors have become more positive on the current economic situation. The current assessment component increased for the sixth consecutive month to its highest level since January 2009.'
'Earlier enthusiasm is now gradually giving way to realism. However, this is no reason to worry. The outlook looks still good, even though the German economy is about to enter calmer waters. The latest numbers show that industrial production has taken over the baton from car-driven private consumption as the main growth driver. The turning inventory cycle, filling order books and accelerating global demand indicate that the positive momentum will continue in the fourth quarter.
'Despite all delight about the ongoing recovery, the biggest risk for the German economy and policymakers would be a return to business as usual. The export-driven recovery is all well and good but in order to transform the recovery into a boom, the German economy needs domestic demand. In this respect, tax cuts and investment incentives are the right way forward. Complacency would be a bad advisor.'
SIMON JUNKER, ECONOMIST, COMMERZBANK
'The correction on equities markets has made analysts more cautious. The economic picture is not changing, as we can see when we look at new orders and foreign trade, which have recently significantly gained. The recovery is clearly ongoing, and it will continue in the fourth quarter as well. If anything, growth will slow, but we do not expect a relapse. There will not be a braking effect due to corrections in partner countries, where export markets are not going so well. That is the reason for a weakening in the growth dynamic next year.'
ALINE SCHUILING, ECONOMIST, FORTIS
'The (ZEW) indicator tends to jump down quite sharply ... it is a significant decline, but it is not dramatic, and it is still above its long-term average, so it is still consistent with robust growth in GDP.'
'This shows, that since it rose for a long time and now has edged lower, this reflects that the German economy recovered very sharply from the economic and financial crisis and next year it will settle down at more moderate, but still robust growth rates.'
'For the third quarter, German growth will be about 0.9 percent Q/Q, which is above trend, but will then settle down to about 0.3 to 0.4 percent Q/Q.'
GILLES MOEC, ECONOMIST, DEUTSCHE BANK
'There might be sense things have moved a bit too fast and we may be heading for some troubled waters now and possibly higher longer time rates.'
'It is usual highly linked to financial market volatility so that might explain it a to some degree.'
BHF BANK ECONOMIST GERD HASSEL
'It is astonishing that the index has worsened. Apparently the mood on financial markets is sinking again after the economic development had previously been seen with euphoria. Realism is returning. That also has something to do with the fact that recent favourable developments were driven by fiscal policy measures. These are likely to end next year and dampen production. Already in the fourth quarter we can expectly only a slight growth in the economy due to the end of the scrapping bonus.'
BACKGROUND
- For a Nov 9 story on a record jump in German industrial output, please click on
- For a Nov 9 story on rising German exports, please click on
- For Nov 6 story on the latest rise in German manufacturing orders, please click on
- For Nov 6 story on latest German tax estimates, please click on
- For Oct 29 story on falling German unemployment, please click on
- For Oct 29 story on declining German engineering orders, please click on
- For Oct 28 story on flat October consumer prices, please click on
(Reporting by Frankfurt Newsroom) Keywords: GERMANY ZEW/ (frankfurt.newsroom@thomsonreuters.com; +49 (0)69 7565 1209) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.