German Investor Confidence Waivers

Investor confidence in Europe's biggest economy unexpectedly declined this month with rising inflation, a strong euro and high oil prices eating into expectations.

BERLIN (AP) -- German investor confidence unexpectedly declined this month with rising inflation, the euro's near-record strength and high oil prices eating into expectations, a closely watched survey showed Tuesday.
The ZEW institute said its monthly index, which measures investors' expectations for the German economy over the next six months, dropped to minus 40.7 points in April from minus 32 last month.
The drop followed two consecutive monthly rises and dashed economists' expectations of another small increase.
''The slight optimism of the financial market experts last month seems to be only a temporary phenomenon,'' ZEW President Wolfgang Franz said in a statement. ''New record highs of the euro and the oil price have reduced expectations again.''
ZEW said ''economic expectations were affected by the extraordinary high price pressure in Germany this month.''
High inflation erodes consumers' available income and weakens private consumption, and the ZEW added that low numbers of incoming orders to German companies point to slower growth.
Germany, which has Europe's biggest economy, saw its annual inflation rate accelerate to 3.1 percent in March from 2.8 percent the previous month. That is part of a trend across the 15-nation euro zone that has prompted the European Central Bank to hold off following others in cutting interest rates.
The euro has been hovering close to all-time highs against the dollar, which has been weighed down by worries about a possible U.S. recession and the Federal Reserve's repeated interest-rate cuts. The dollar hit a new low last week.
That raises the prospect of European goods becoming less competitive overseas, eating into exports -- a key element of Germany's current economic upswing.
However, ''at the moment there is no reason for exaggerated pessimism,'' Franz said. ''A growth rate for Germany of 1.7 percent this year is still realistic.''
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