German investor confidence fell to the lowest in 15 months in September as higher oil prices and unemployment weigh on a recovery in Europe's largest economy. The ZEW Center for European Economic Research's index of institutional and analyst sentiment declined to 38.4 from 45.3 in August. Economists expected a reading of 45, according to the median of 42 forecasts in a Bloomberg survey. Germany's economy is lagging that of the U.S. as companies including Volkswagen AG threaten to cut jobs, hurting consumer confidence which last month fell to the lowest since June 2003. As a 37 percent surge in oil prices this year jeopardizes foreign demand, a German recovery may struggle to gather pace.
``I don't see any signs that a recovery in the domestic economy is taking hold -- we don't expect an acceleration next year,'' said Lothar Hessler, an economist at HBSC Trinkhaus & Burkhardt KgaA in Dusseldorf, which took part in the ZEW survey. Germany's benchmark DAX Index fell after the report, dropping as many as 11.53 points to 3941.78 at 11:05 a.m. in Frankfurt. ZEW's index, the result of 298 responses, has a long-term average of 34.8. The survey was conducted between August 30 and Sept. 13.
Exports Threatened
With export growth threatened by higher energy costs, German consumers are showing few signs they will take up the slack and raise spending, which accounts for more than half the economy. Unemployment rose the most in five months in August and Volkswagen AG, Europe's largest carmaker, is threatening to cut 30,000 jobs if workers don't accept a pay freeze. Stagnant demand is reining in Germany's ability to benefit from the fastest global growth in four years. The International Monetary Fund expects Germany to grow 1.8 percent this year compared with 4.5 percent for the U.S. and the Japan. ``Domestic demand remains the wild card of the economy -- but it's not looking good,'' said Carsten Klude, head of strategy at Hamburg-based M.M. Warburg & Co KgaA, which manages the equivalent of almost $20 billion.
For now, exporters are weathering higher crude prices. Factory orders rose 3 percent in July, twice the rate forecast by economists, and industrial output rose the most in nine months. European Central Bank President Jean-Claude Trichet said yesterday recent economic reports ``suggest some strengthening'' in the global recovery in the third quarter. Germany's IWH and DIW economic institutes last week raised their growth forecasts for the economy. ``Exports have pulled growth along -- there isn't much sign of weakness there,'' said Hessler.
DAX Increase
Stock investors are also becoming more optimistic about German growth prospects. The country's benchmark DAX Index has gained 3.7 percent in the past six months, almost twice the gain of the U.S. Standard & Poor's 500 Index in the same period. ZEW says its investor confidence index, compiled between August 30 and Sept. 13, acts as a pointer to the Ifo economic institute's business confidence report. Ifo's September report, one of Europe's most widely watched indicators, will be released on Sept. 27. ///www.bloomberg.com