German Investor Confidence Wanes Amid Persistent Supply Concerns

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Investor confidence in the German economy declined for a fourth month in September after infection rates and global supply disruptions worsened, threatening to disrupt Europe’s strong recovery.

The ZEW institute’s gauge of expectations fell to 26.5 from 40.4 the previous month, the lowest in 1 1/2 years. The outlook for the euro zone also deteriorated, after the economy grew faster than initially reported in the second quarter.

Coronavirus cases are on the rise across the world. Most countries in Europe, where 77% of the adult population have received at least one shot, have signaled there won’t be any lockdowns similar to the ones that paralyzed the economy last year. 

Yet retailers and hospitality providers might still suffer if consumers get wary of going out. Private consumption was the main growth driver in the second quarter. It was also the main drag in the previous six months.

Meanwhile, the fortunes of export-reliant manufacturers are partially tied to decisions by governments elsewhere. Outbreaks in Asia have triggered strict curbs over the past weeks, amplifying supply shortages and delivery delays that were once considered temporary. 

Volkswagen AG’s Chief Executive Officer Herbert Diess warned on Monday that semiconductors will be hard to come by for years — a scenario that would pose a significant challenge for the economy.

“Global chip shortage in the automobile sector and shortage of building material in the construction sector have caused a significant reduction in profit expectations for these sectors,” ZEW President Achim Wambach said in a statement. “This may have had a negative effect on economic expectations.”

ZEW said its survey suggests economic growth in Germany over the next six months will only be slightly faster than currently observed. In the second quarter, the period for which data are last available, output increased 1.6%.

Input prices have surged as a result of the bottlenecks, and businesses are increasingly passing them on to their clients, mounting pressure on the European Central Bank to reassess its inflation outlook.

Policy makers are meeting this week to discuss new forecasts and the region’s immediate need for monetary stimulus. Most economists expect the ECB to slow its bond-buying pace in the coming quarter after a strong performance in the first half.

In the three months through June, the economy grew 2.2%. While private consumption contributed the lion’s share, government spending and investment also bolstered output.

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