German Investor Confidence Slips as Politics Weighs on Outlook

(Bloomberg) -- German investor confidence slid in December for the first time in four months, in a sign that political woes might be clouding the outlook for Europe’s largest economy.

The ZEW Center for European Economic Research in Mannheim said on Tuesday that its index of investor expectations, which aims to predict economic developments six months ahead, fell to 17.4 from 18.7 in November. Economists in a Bloomberg survey predicted a drop to 18.

German Investor Confidence Slips as Politics Weighs on Outlook

Stocks have slipped in recent weeks as Chancellor Angela Merkel struggles to form a government, with the DAX Index down 3 percent since its November peak. Companies are also starting to run into production bottlenecks as they struggle to keep up with demand amid record-low unemployment, while other risk factors include the U.K.’s negotiations to leave the European Union.

Still, Germany’s economy is on track for its strongest expansion since 2011. The Economy Ministry said in a report on Tuesday that output should remain on an upward trend as the year draws to a close.

The euro-area recovery is also picking up speed. The European Central Bank will unveil fresh economic forecasts for the 19-nation bloc on Thursday after its final policy meeting of the year. The projections are likely to show upward revisions for growth and will contain a first outlook for 2020. The ECB decided in October to extend its bond-buying program until September, albeit at a lower pace.

ZEW’s gauge for current conditions in Germany gained in December to 89.3 from 88.8. A measure for expectations in the euro area declined to 29.0 from 30.9.

©2017 Bloomberg L.P.