The ZEW Indicator of Economic Sentiment for Germany dropped by 16.6 points in September, it was announced today. In August the decrease was only 5.6 points. According to a statement the indicator’s current level of minus 22.2 points is far below the historical average of 34.7 points.

A statement by the Centre for European Economic Research has attributed the decline of world demand resulting from an expected slowdown of the US economy, which is likely to adversely affect German exports.

Also the statement cites the positive impacts of domestic demand which will lessen at the start of 2007. The result it says will be that “the VAT increase will slow down private consumption.”

Also investment projects will be more expensive due to the restrictive monetary policy of the European Central Bank