Germany near recession after ZEW sentiment turns negative in October
MANNHEIM, Germany—Germany’s ZEW institute doesn’t rule out a recession in Germany, after a plunge in the ZEW sentiment survey Tuesday added to evidence that the eurozone’s most powerful economy is on the skids.
ZEW President Clemens Fuest said he couldn’t rule out an economic contraction in the third quarter.
“We are getting close,” Mr. Fuest said at a news conference following the release of the survey data, however he noted any recession would likely be short-lived given Germany’s strong domestic fundamentals.
Gross domestic product shrank 0.6% in the second quarter from the previous three months. A recession is defined as two consecutive quarters of economic contraction.
The ZEW survey of financial analysts measuring sentiment slumped into negative territory, to minus 3.6, considerably weaker than the average forecast of 0.8 in a poll by The Wall Street Journal, after September’s 6.9 figure. This is the first time the reading has fallen below zero in nearly two years (November 2012).
The survey follows a number of weak German data releases, such as August’s steepest on-the-month fall in exports since the 2009 recession, flanked by tepid figures on industrial output and manufacturing orders.
Last week, the International Monetary Fund revised its view of the eurozone, raising the likelihood of recession to nearly 40% from just over 20% in April, while German economic institutes chopped their consensus growth forecast for this year to 1.3% from a 1.9% forecast in the spring.
