Sino-US trade spat weighs on German business sentiment
German economic sentiment unexpectedly deteriorated in May as worries about trade relations between the US and China took their toll, according to the latest survey from the ZEW Center for European Economic Research in Mannheim.
The headline ZEW economic sentiment index fell to -2.1 from 3.1 the month before, missing expectations for a reading of 5.0.
Meanwhile, the current situation index rose to 8.2 in May from 5.5 in April, falling short of expectations for an increase to 7.5.
ZEW President Achim Wambach said: "The decline in the ZEW indicator of economic sentiment shows that the financial market experts continue to expect restrained economic growth in Germany for the next six months.
"The most recent escalation in the trade dispute between the USA and China again increases the uncertainty regarding German exports - a key factor for the growth of the gross domestic product."
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "The slide in the ZEW investor expectations looks ugly compared to the consensus, but we suspect that this is partly because many forecasts were formed before the most recent volatility in markets, while at least some of the responses were taking last week as the slide began, in response to the escalating trade dispute between China and the US.
"The ZEW press release supports this explanation, in part, by referring the to the souring trade negotiations between Washington and Beijing as a source of uncertainty in this month’s report. Looking ahead, the escalation in the trade wars point to downside risks to investor sentiment, and risk assets, though the May dip in the expectations index was minor overall."