Confidence among German investors unexpectedly deteriorated in July as the faltering external demand continued to weaken the country's exports and industrial production recorded a faster-than expected contraction.
A monthly survey by the ZEW Center For European Economic Research on Tuesday showed that the investor confidence index dropped for the first time in three months, to 36.3 points from 38.5 points in June.
Economists had forecast the index, which measures investors' economic outlook for the next six months, to rise to 40 points. The score, however, remains far above its historical average of 23.7.
Meanwhile, surveyed respondents showed increased confidence in the country's current economic situation, with the relevant indicator rising to 10.6 in July from 8.6 a month earlier. The forecast was for a reading of 9.
The indicator of economic expectations in euro area gained 2.2 points month-on-month in July to reach 32.8 points. At the same time, the measure of confidence in the current economic situation in the bloc moved up to -74.7 points.
"The financial market experts stick to their overall positive forecast," ZEW President Clemens Fuest said. "This illustrates their confidence in the robustness of the German economy despite the rather weak figures concerning industrial production and foreign trade released recently."
Dealing a strong blow to the German business sentiment, data released by the government this month showed that industrial production declined more-than-expected in May due to a sharp fall in construction and energy output. Production contracted the most since October last year.
In May, Germany's exports unexpectedly declined 2.4 percent month-on-month, reflecting the weaknesses in global demand. Consequently, the trade surplus dropped to EUR 13.1 billion from EUR18 billion in April.
In contrast, a survey by the Ifo Institute last month showed that German business morale strengthened for the second straight month in June on improving optimism about future activity.
The Bundesbank forecasts that the economy will pick up strongly in the second quarter, but sees a slowdown in the momentum over the summer. The bank expects 0.3 percent growth this year, and 1.5 percent in 2014.
Last week, rating agency Standard & Poor's affirmed Germany's 'AAA' credit rating as the country demonstrated ability to absorb huge economic and financial shocks. The agency, which maintained the 'stable' outlook on Germany's long-term credit rating, said the economy will maintain steady growth over the medium term.
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May 08, 2026 15:50 ET Manufacturing and services sector survey results and labor market data from main economies were the highlight on the economics news front this week. Factory orders and jobs report dominated the news flow in the U.S. Similarly, industrial production data from German garnered attention in Europe. In Asia, purchasing managers’ survey results from China and the central bank decision from Australia were in focus.