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- Carsten Brzeski from ING
German investors' morale declined considerably more than expected in May, falling for the second consecutive month. According to the ZEW Center for European Economic Research, the economic sentiment index, measuring the outlook of around 350 German analysts and investors for the upcoming six months, plunged to 41.9, down from 53.3 in the previous month, and marking the lowest level in five months. Analysts, however, had expected the gauge to slid to 49.0. Moreover, the Current Situation Indicator came in at 65.7 in May, falling from April's 70.2 and compared with analysts' forecast of 68 points. Last week, the data revealed Germany's GDP in the first quarter of 2015 expanded 0.3%, following the 0.7% growth recorded in the final three months of 2014. While domestic demand remained the main driver for economic growth, concerns are mounting that if consumers start refraining from spending, the overall German growth will drop sharply. Yet, Bundesbank remained optimistic on economic prospects, as it expected the German economy to continue to grow in the coming months even though growth in German industry will be rather sluggish.
Euro zone's ZEW economic sentiment also fell below expectations to 61.2, down from 64.8, while consumer inflation in the currency bloc remained flat in April.