Ngio Forum

FRANKFURT (AFP) - German investor confidence plunged to a record low point in July, falling below economists’ forecasts as high oil prices and a rising euro slam Europe’s biggest economy, a key survey showed on Tuesday.

The ZEW research institute said its closely watched indicator of economic sentiment fell 11.5 points to minus 63.9 points, the lowest level since the survey began in December 1991.

The previous low was minus 62.2 points, hit during a recession in December 1992, a ZEW spokesman told AFP.

“High oil prices, the strong euro, the crisis in the United States, an interest rate hike by the European Central Bank and weak domestic consumer demand are likely to put pressure on German companies in the coming six months,” a ZEW statement said.

The European single currency leapt to a record high point of 1.6038 dollars in London after the survey was released, as investor fears grew over the state of the US economy and its financial services sector, dealers said.

Economists polled by Dow Jones Newswires had expected the ZEW index to post a more gentle decline in July to minus 56 points.

A negative level indicates that financial specialists expect the German economy to decline in the coming half year.

A sub-index that measures sentiment on the current situation also fell markedly from an indexed 20.6 points to 17.

The new overall record “confirms that investors are getting increasingly worried about the effects of soaring inflation, the credit crunch and the ECB’s recent rate hike on economic activity,” said European economist Ben May at Capital Economics.

But, he added, “given that the headline index has previously been a fairly poor predictor of German GDP growth, we still expect a relatively moderate economic slowdown.”

At UniCredit Markets, Andreas Rees said that “the list of negative factors which weighed on expectations is long, not to say have become unmanageable.

“Above all, turbulence on financial markets has been on economists’ and asset managers’ minds once again.”

Financial markets have been rocked in the past week by sharp falls in the shares of two US mortgage-finance giants, Fannie Mae and Freddie Mac, while investment giant Lehman Brothers and other US banks have also been roiled by falling confidence in the banking sector.