Trade fears weigh on outlook in export champ Germany

Posted April 17th, 2018

FRANKFURT, Germany — 

Fears about international trade disputes and the conflict in Syria have sent the economic outlook lower among investment professionals in Germany, the largest economy in the 19-country euro currency union.

It's only the latest sign that looming trade conflict between the U.S. and China is weighing on the outlook in Europe, after several other economic indicators dropped recently.

The ZEW research institute index released Tuesday fell in April by 13.3 points to minus 8.2 points, the second sharp monthly drop in a row. The index, is based on a survey of investment analysts about their outlook for the coming months, is now well below its long-term average of 23.5 points.

U.S. President Donald Trump has announced tariffs on steel and aluminum imports as well as on a range of Chinese goods, sparking concerns about retaliation and an escalating trade war. Germany's economy is heavily dependent on exports such as industrial machinery and autos. China has announced retaliatory tariffs on several categories of U.S. goods, but it's not clear how far the conflict will escalate. China on Tuesday announced plans to allow full foreign ownership of automakers in five years. That would end restrictions that helped fuel the dispute with Trump.

Economist Carsten Brzeski at ING said that the analysts were influenced by recent falls in hard economic indicators after a strong performance last year. Eurozone industrial production, for instance, fell for the first two months of the year.

"For the time being, disappointing sentiment indicators are, in our view, still no reason to get overly concerned," he said in an email. "As much as the end of last year was about overshooting and too much euro-phoria, recent data could be the result of undershooting. The truth is somewhere in the middle."

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