German Investor Confidence Plunges Amid Coronavirus Risks

(Bloomberg) --

Investors have been plunged back into a gloomy mood over the German economy on concern the coronavirus outbreak in China will disrupt global trade.

Expectations for the next six months fell below even the most pessimistic estimate in a Bloomberg survey, suggesting confidence is fading that Europe’s largest economy can stem a manufacturing recession that has lasted more than a year. Growth flatlined at the end of last year, and the Bundesbank doesn’t see momentum improving in the current quarter.

The euro fell after the report and traded at $1.0831 at 11:42 a.m. Frankfurt time, down 0.1%.

“Economic development is rather fragile at the moment,” ZEW President Achim Wambach said in a statement. The outlook for export-intensive sectors has deteriorated “particularly sharply” as a result of the epidemic that originated in China, he said.

The Asian country is a huge market for German businesses. Outside the European Union, it’s second only to the U.S. in importance, with close to 100 billion euros ($108 billion) of sales a year. Factory closures there are weighing heavily on manufacturing supply chains, and companies including Osram Licht AG have warned of consequences to their bottom lines.

The Bundesbank has described the deadly virus as a “cyclical downside risk” for Germany’s economy. Still, domestic demand and construction should continue to support the economy for now.

What Bloomberg’s Economists Say

“The ZEW expectations survey for February, which is volatile but tends to lead the rest, suggests the path to recovery will be bumpy.”

-- Jamie Rush. Read the GERMANY REACT

Expectations for the wider euro area also worsened, the ZEW report showed. Last week, European Central Bank Chief Economist Philip Lane said the region’s economy could experience a “pretty serious short-term hit.”

While this month’s survey didn’t feature a specific question on effects of the coronavirus, the Mannheim-based ZEW institute plans to ask about it next month. The survey took place from Feb. 10-17.

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