The ZEW Economic Sentiment, a survey of approximately 350 economists and analysts regarding the economic future of Germany for the next six months, plunged this month amid fears about the finances of Slovenia, Portugal and Italy.
The survey fell 12.2 points from the March level of 48.5 and is now at 36.3 points. It had been expected to slip to 42. However, the indicator is at its third highest mark within the last 24 months, while the current level has only been exceeded in the two preceding months.
"Basically, the surveyed financial market experts remain confident but are less optimistic than they have been in the previous month. The decline in economic sentiment is consistent with the release of economic data that fell short of expectations," ZEW President Clemens Fuest said in a statement.
Concurrently, analysts suggest that further falls in sentiment could be likely, given growing fears about troubles in Slovenia, Portugal and Italy and their impact on the German economy and public finances.
“We have already seen signs of a renewed slowdown in more reliable German business surveys such as the PMI and in the hard industrial production data," Capital Economics’ senior European economist Jennifer McKeown said.
“While we still see Germany easily outperforming the rest of the euro zone this year, we think that a strong and sustained recovery is too much to hope for,” she added.
Analysts suggest that the German economy will continue to stagnate this year and grow by just 0.5 percent next year.
"While we still see Germany easily outperforming the rest of the euro zone this year, we think that a strong and sustained recovery is too much to hope for," Capital Economics said.