Ukraine, Scotland dent German investor optimism

Staff Writer
Columbus CEO

FRANKFURT, Germany (AP) — A key measure of German investor optimism fell in September for the ninth month in a row, dragged down by worries over the crisis in Ukraine, economic stagnation in Europe and the upcoming independence referendum in Scotland.

The reading sends a negative signal about Europe's biggest economy as it tries to rebound from a quarter of shrinking output.

The ZEW institute said Tuesday its indicator of economic sentiment fell to 6.9 points from 8.6 points the month before. The drop was smaller than expected — market analysts had foreseen a drop to 5.0 points — but extends a prolonged decline.

ZEW head Clemens Fuest said the downward trend has slowed significantly but that "the economic climate is still characterized by great uncertainty."

The German economy shrank by 0.2 percent in the second quarter. An unusually warm winter led to early construction starts, pulling some growth ahead into the first quarter. But the major factor appears to have been fear that the conflict between Russia and Ukraine could escalate.

European Union and U.S. sanctions against Russian for its involvement in the fighting in Ukraine have raised fears of further retaliatory trade restrictions that will weigh on growth. Meanwhile, the impact of a "yes" vote Thursday for Scottish independence is difficult to assess.

And though domestic demand in Germany remains strong and unemployment is low, the European economy, where German companies do much of their business, is dead in the water. It did not grow at all in the second quarter and expectations for growth the rest of the year are dropping.

Analyst Carsten Brzeski at ING wrote in a note to investors that the ZEW reading "just sent more signs of caution, showing that at least financial market participants are quickly losing confidence in the German growth story. "

The ZEW index remains below its long-term average of 24.6 points. It was based on a survey of 234 investment analysts conducted Sept. 1-15.