Ukraine fears knock German sentiment

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Eva Taylor and Kirsti Knolle Mannheim, Germany

German analyst and investor sentiment plunged this month at the fastest pace in nearly a year amid fears that the crisis in Ukraine could weigh on the economy, a leading survey showed yesterday.

The ZEW’s monthly survey of economic sentiment dropped to 46.6 from 55.7 last month, falling short of even the lowest analyst forecast of 49.9. The consensus forecast was for 53. It was the sharpest fall since April last year and the third drop in a row.

“The Crimea crisis is weighing on experts’ economic expectations for Germany,” said ZEW president Clemens Fuest. “Nevertheless, the indicator’s level suggests that the economic upswing is currently not at risk.”

The seizure of the Ukrainian region of Crimea by Russian-speaking troops has ratcheted up tensions between Russia and the West. The US and EU imposed personal sanctions on Monday on Russian and Crimean officials involved in the seizure.

The think tank’s survey showed a separate gauge of current conditions rose to 51.3 points in March from 50 in February, slightly undershooting the forecast for a reading of 52 yet still underscoring the strength of the German economy.

Christian Schulz, an economist at Berenberg Bank, said the combination of emerging market turbulence earlier this year and the stand-off between Russia and the West might have a “mildly dampening impact on Germany’s investment climate” and therefore on growth.

But he noted that “it would take a much more serious crisis in Ukraine to derail the recovery in Germany and the euro zone as a whole”.

The German economy, a growth locomotive in the early years of the euro crisis, has slowed in the past two years as exports have weakened and some firms have delayed investments but the government expects it to grow by 1.8 percent this year.

Recent economic figures have been upbeat, with industrial output and orders and exports rising in January. Other surveys of sentiment have shown consumers are feeling their most positive in seven years and business morale is rising.

ZEW based its index on a survey of 241 analysts and investors between March 3 and 17. – Reuters


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