The German ZEW indicator of economic sentiment saw a steep drop in August, missing analysts’ expectations and sending the euro lower, amid increasing concern over the health of the euro zone’s biggest economy.
The ZEW institute’s index, a gauge of investor morale in the country, hit 8.6 points, sharply below the 18.2 forecast in a Reuters poll, and a big drop from July’s reading of 27.1. This is the lowest reading since December 2012.
ZEW’s current conditions index came in at 44.3 points, a drop from 61.8 in July. Analysts had expected a figure of 55.5.
The think tank said sluggish demand in the euro zone as well as geopolitical tensions in Russia could see German growth come in weaker than expected this year.
“The decline in economic sentiment is likely connected to the ongoing geopolitical tensions that have affected the German economy by now,” ZEW said in a statement.
“In particular, current figures on industrial production and incoming orders suggest markedly reduced investment activities on the part of German firms against the backdrop of uncertain sales prospects. Since the economy in the euro zone is not gaining momentum either, the signs are that economic growth in Germany will be weaker in 2014 than expected.”