Tuesday, April 20, 2004
Pessimism growing about strength of recovery in Germany: Survey
Associated Press Frankfurt, April 20
A survey of German financial professionals about their growth expectations dropped for the fourth straight month in April in another unsettling sign for Europe's largest economy, the ZEW research institute said on Tuesday.
The ZEW index fell to 49.7 from 57.6 the month before, meaning that "further economy recovery this year is by no means certain yet," ZEW president Wolfgang Franz said. Economists surveyed by Dow Jones Newswires had predicted 58.
Most economists predict Germany will break out of stagnation this year after three years of near-zero growth, but worries about the strength of the recovery have grown as leading indicators such as the ZEW index have gone into reverse. The much-watched Ifo institute survey of business managers fell for the second month in a row in March.
The German economy, the largest of the 12 countries that use the euro currency, shrank last year by 0.1 per cent, helping push unemployment to 10.9 per cent.
Many researchers cite weak consumer demand as the chief problem, with people afraid to spend because they're worried about losing their jobs. Meanwhile, the growing US and world economies are expected to provide a boost to exporters.
The ZEW survey's outlook remains positive, since the index remains above its historic average of 34.4 on a scale of minus 100 to plus 100. But senior economist Andreas Rees at HVB Group in Munich said the new numbers were a sign that growth would be weak.
Asked whether there would be a recovery at all, he said, "It is a recovery but only by German standards. You cannot compare it to the recovery in the United States or even in Japan." Rees said that Germany would need at least 2.8 per cent growth to begin reducing its unemployment rate.
The bank has cut its outlook for 2004 growth to only 0.9 per cent, from its previous prediction of 1.2 per cent. The German government predicts 1.5 per cent to two per cent.
The index compiled by the Mannheim-based ZEW, or the Center for European Economic Research, was based on a poll of 306 asset managers and economists at financial institutions about their outlook for the next six months.
© Hindustan Times Ltd. 2004.