Tuesday brought more bad news for the Germany economy as the market anxiously ponders the prospect of a recession and the very real possibility that Berlin will not loosen the fiscal purse strings even in a downturn.
Investor confidence (as measured by the ZEW survey) collapsed 19.6 points in August to -44.1, the lowest since December of 2011, in yet another stark sign of the malaise gripping the world’s fourth-largest economy.
The long-term average is around 22 and the -44.1 print made a mockery of consensus (-28) and came in below even the most pessimistic estimates.
At the same time, the current conditions index plunged 12.4 points to -13.5 in August.
ZEW President Achim Wambach called this a “significant deterioration in the outlook”.
“The most recent escalation in the trade dispute between the US and China, the risk of competitive devaluations, and the increased likelihood of a no-deal Brexit place additional pressure on the already weak economic growth”, Wambach said Tuesday, adding that “this will most likely put a further strain on the development of German exports and industrial production”.
You could quibble that PMIs and Ifo are better for judging the strength (or weakness, in this case) of the German economy, but you won’t get much in the way of respite from the gloom by referencing those, that’s for sure.
German equities have fallen nearly 5% this month amid the slide in bund yields.
Speculation that the government might be willing to reconsider (or at least soften) its hardline budget stance in the interest of issuing debt to fund a climate initiative sparked talk of a fiscal U-turn last week, but Berlin threw cold water on the rumor.
“The chancellor has never left any room for doubt about the fact that she stands by the goal of a balanced budget”, Angela Merkel’s spokesman, Steffen Seibert, said Monday.
And so, we’ll all just sit around and wait on the recession, one supposes.