Forexpros – German economic sentiment for June deteriorated significantly more-than-expected, turning negative for the first time since January, industry data showed on Tuesday.
In a report, the ZEW Centre for Economic Research said that its index of German economic sentiment tumbled by 27.7 points to minus 16.9 in June from May’s reading of 10.8.
Analysts had expected the index to decline by 6.8 points to 4.0 in June.
The 27.7 point drop was the indicator’s strongest decline since October 1998.
The Current Situation index fell to 33.2 in June from 44.1 in May, disappointing expectations for a more modest decline to 39.0.
On the index, a level above 0.0 indicates optimism, a level below 0.0 indicates pessimism.
Meanwhile, economic sentiment in the euro zone remained in negative territory for the second consecutive month in June, dropping by 22.5 points to minus 20.1 from a reading of minus 2.4 in May.
Economists had expected euro zone economic sentiment to decline 3.3 points to minus 5.7 in June.
The report said that the worsening of the situation in the Spanish banking sector and the insecurity about the outcome of the Greek general election, which had been lasting for most of the survey period, are likely to have contributed to the sharp decline of the indicator.
Commenting on the report, ZEW President Wolfgang Franz said, “The risks of a pronounced decline in economic activity in countries with close trade ties to Germany are very clear.”
“The outcome of the Greek vote is a short breathing space – just that, nothing more and nothing less,” Mr. Franz added.
Following the release of that data, the euro remained mildly higher against the U.S. dollar, with EUR/USD rising 0.12% to trade at 1.2592.
Meanwhile, European stock markets remained flat to mildly higher. The EURO STOXX 50 was flat, France’s CAC 40 was unchanged, Germany’s DAX eased up 0.2%, while London’s FTSE 100 gained 0.7%.
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