German investor confidence fell to its weakest in 13 months in August, the ZEW institute said on Tuesday, and warned that analysts were increasingly worried oil prices could dampen economic growth. The Mannheim-based think tank said its expectations indicator, based on a survey of around 300 analysts and institutional investors, dropped more than expected to 45.3, the lowest since 41.9 in July 2003, from 48.4 in July. The mid-range forecast of 29 economists polled by on Friday was for a fall to 47.5. Forecasts ranged from 40.0 to 50.3 . ZEW's gauge of current conditions rose to minus 65.2, from minus 69.3 the previous month, slightly stronger than the forecast minus 69.0. "The assessment by financial analysts coincides with fears that the momentum of the economic recovery in this country will weaken because uncertainty about the global economy and the oil price has mounted," said ZEW President Wolfgang Franz.
Andreas Rees, an economist at HVB Group in Munich, attributed the drop in the ZEW indicator to the surging oil prices and sliding stock markets. "The downtrend in the ZEW indicator remains intact and points to a weakening of economic growth in Germany in the second half," Rees said. The survey began on August 6 and closed at 1500 GMT on August 16. Oil prices have risen to record highs in all but one of the past 12 trading sessions, rising by about 7.5 percent this month to around $45 a barrel and by some 40 percent since the beginning of the year. Analysts estimate that an oil-price rise of $10 sustained over a period of 12 months could shave as much as four tenths of a percentage point from Germany's annual growth rate. Prices have soared due to a combination of surging demand from China, a lack of spare capacity outside Saudi Arabia, and political tensions in the Middle East, which have undermined traders' confidence in the security of supplies.
STAGNANT SPENDING
On Monday, the Bundesbank said Germany's export-driven economy may not be able to sustain the moderate growth rates of the first and second quarters and that further oil price gains would pose a "serious risk." The economy grew 0.5 percent in the April through June period, preliminary statistics office data showed last week, slightly faster than the 0.4 percent growth of the first quarter. However, Germany's DAX stock index of 30 leading firms has lost five percent since the start of August, more than the three percent decline on the FTSE Eurotop index of leading European shares. German exporters such as ThyssenKrupp have benefited from surging demand from the U.S. and Asia, but retailers such as KarstadtQuelle AG have struggled to cope with stagnant consumer spending. The ZEW survey provides a pointer to the possible direction of the Munich-based Ifo institute's key measure of business sentiment, due on August 26. Ifo's business climate index for July, based on a survey of around 7,000 industrial companies, rose to 95.6 following two months of declines and the institute said the increase suggested Germany's moderate upswing would continue into the second half. But Lehman Brothers economist Phyllis Papadavid said August's drop in the ZEW indicator "does not bode well" for next week's Ifo report, given that the ZEW survey "has tended to provide a good lead indication." ZEW's index of expectations for the 12-nation euro zone fell to 52.0 from 55.5.///