German Investor Morale Declines in January

By Maria Martinez
BERLIN (Reuters) – German investor morale fell more than expected in January, according to the ZEW economic research institute. This decline follows the German economy contracting for the second consecutive year.

The institute’s economic sentiment index dropped to 10.3 points from 15.7 points in December, significantly below the analyst forecast of 15.3 points.

ZEW president Achim Wambach stated, “A lack of private household spending and subdued demand in the construction sector continue to stall the German economy. If these trends continue in the current year, Germany will fall further behind the other countries of the euro zone.”

Germany, once Europe’s economic powerhouse, is now underperforming compared to its peers and was the only major economy to contract last year.

Disagreements on how to revive Europe’s largest economy were key factors in the collapse of German Chancellor Olaf Scholz’s three-party coalition last year, making the economy a top concern for voters.

The decline in the economic sentiment index is also attributed to political uncertainty stemming from potential difficulties in coalition-building in Germany, Wambach added.

Elections are scheduled for February 23, with reviving the country’s sluggish growth being a key topic in the campaign.

Investor morale is further impacted by the unpredictability of policymaking under the new U.S. administration, according to Wambach.

As Germany’s main trading partner, a record high German trade surplus with the U.S. last year could be threatened if U.S. President Donald Trump implements punitive trade tariffs.

The assessment of the current economic situation in Germany changed only slightly, with the indicator rising to -90.4 points from -93.1.