Investors have been plunged back into a gloomy mood over the German economy on concern the coronavirus outbreak in China will disrupt global trade.
Expectations for the next six months fell below even the most pessimistic estimate in a Bloomberg survey, suggesting confidence is fading that Europe’s largest economy can stem a manufacturing recession that has lasted more than a year. Growth flatlined at the end of last year, and the Bundesbank doesn’t see momentum improving in the current quarter.
The euro fell after the report and traded at $1.0831 at 11:42 a.m. Frankfurt time, down 0.1%.
“Economic development is rather fragile at the moment,” ZEW President Achim Wambach said in a statement. The outlook for export-intensive sectors has deteriorated “particularly sharply” as a result of the epidemic that originated in China, he said.
The Asian country is a huge market for German businesses. Outside the European Union, it’s second only to the U.S. in importance, with close to 100 billion euros ($108 billion) of sales a year. Factory closures there are weighing heavily on manufacturing supply chains, and companies including Osram Licht AG have warned of consequences to their bottom lines.
The Bundesbank has described the deadly virus as a “cyclical downside risk” for Germany’s economy. Still, domestic demand and construction should continue to support the economy for now.
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