The mood among German analysts and investors deteriorated in January, a survey showed on Tuesday as the ZEW think tank said a slowdown in China and other emerging markets was continuing to cloud the outlook for Europe's largest economy. Mannheim-based ZEW said its monthly survey showed economic sentiment fell to 10.2 points from 16.1 in December. That was its lowest reading since October but still higher than the Reuters consensus forecast for 8.2.
Carsten Brzeski, chief economist at ING-DiBa said the more pessimistic mood was due to a drop in stock markets and a growing number of market participants thinking the low oil price would have a negative impact on the economy. "Despite the fact that 2015 overall was a good year we do see that the economy is suffering from external headwinds such as China, emerging markets, adverse effects from low oil prices and there is now a growing question about the US economy," he said.
Preliminary data released last week showed the German economy grew by 1.7 percent in 2015, its strongest rate in four years, as consumers benefiting from rising wages and record-high employment splash out while a record influx of more than a million migrants last year is pushing state spending higher. The government expects the economy to grow by 1.8 percent this year.
Sascha Steffen, a researcher at ZEW, pointed to capital market turbulence in China causing the German stock market to drop and added that as in 2015, a lack of growth momentum in China and other emerging markets was hurting Germany's prospects. Jennifer McKeown, economist at Capital Economics, also said the survey added to indications that German growth was slowing. Recent data has shown imports growing faster than exports, Germany's traditional growth engine, and industrial output falling, though orders have risen.
A separate gauge of current conditions rose to 59.7 points from 55.0 points the previous month - its highest level since September, confounding expectations for it to fall to 54.0. The ZEW index was based on a survey of 227 analysts and investors conducted between December 30 and January 18.