Business confidence in Europe’s largest economy took a turn for the worse this month, according to the highly regarded Centre for European Economic Research (ZEW) Indicator.
The research institute said its monthly barometer dropped by 5.2 points in October, to minus 27.4, its lowest level in more than 13 years. Incoming orders to German companies and lower oil prices during the survey period helped support the reading, but concerns about a slowdown in the U.S., the likelihood of further interest rate hikes by Europe’s central bank, and consumers’ declining purchasing power as a result of higher taxes next year served as a drag on sentiment.
The index remains well below its historical average of 34.3 points.
“The good news is that expectations are about to stabilize,” said ZEW President Wolfgang Franz. “The bad news is that they will level out at a comparatively low level, which was also caused by the unsuccessful reform of the German health system.”
Economic expectations for the euro zone also dipped in October, down 2.3 points at minus 12.5. The corresponding indicator for the current economic situation in the euro zone increased by 2.6 points, to 43.1.
Nearly 300 analysts and institutional investors took part in this month’s survey, ZEW said.