FRANKFURT (Bloomberg) — German investor confidence unexpectedly fell for the first time in six months, signaling that the uncertainty induced by Greece’s debt crisis may be weighing on Europe’s largest economy.
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, fell to 53.3 in April from 54.8 in March. Economists had forecast an increase to 55.3, according to the median of 33 estimates in a Bloomberg News survey.
The Bundesbank said on Monday that recent data suggest growth momentum in Germany is probably weaker than anticipated, though the economic expansion will continue to be “quite robust.” Factory orders dropped in the first two months of the year as fears of a Greek default damped demand.
“The current weakness of the world economy is dampening export prospects and reducing the scope for further improvements of the economic situation in Germany,” ZEW President Clemens Fuest said in a statement. At the same time, “the German economy is in good shape. A stable labor market and increasing wages are strengthening confidence and boosting consumption.”
Germany’s economy expanded 0.5 percent in the three months through March, according to a Bloomberg survey of economists, and will continue to grow at that pace in the remaining quarters of the year.
The “main driver of the still quite robust economic growth should have still been private consumption, at least as indicated by the strong increase in retail sales,” the Bundesbank wrote in its monthly report.
The economy is benefiting by the European Central Bank’s 1.1 trillion-euro ($1.2 trillion) quantitative-easing program, which has pushed yields on German bonds with a maturity of as long as nine years below zero and propelled the benchmark DAX Index to a record this month.
Greek bonds declined on Monday after Prime Minister Alexis Tsipras ordered local governments to move funds to the central bank. The decree illustrates the severity of the country’s financial impasse as month-end salary and pension deadlines draw closer and the International Monetary Fund insists on the timely payment of a 770 million-euro tranche on May 12.
The ECB, which is supporting Greek banks, and by extension the economy, with emergency liquidity, is convinced the country will remain in the euro area, vice president Vitor Constancio told European lawmakers in Brussels. Across the currency region, “our policies are working and the economic recovery is becoming self-sustained,” he said.
Any decline in the ZEW gauge “should not signal much more than some re-adjustment of expectations to more sustainable growth rates,” Anatoli Annenkov, senior economist at Societe Generale SA in London, said before the report. “Germany is still in a very strong position to benefit from the exceptional policy stimulus in Europe.”