German economic sentiment stabilized in September after a modest recovery in the previous month amid mixed signals on exports and industrial production and overall European economy, results of a closely-watched survey showed Tuesday.
The ZEW Indicator of Economic Sentiment held steady at 0.5 points in September, which is well below its long-term average of 24.1 points, the Mannheim-based Centre for European Economic Research/ZEW said. Economists had expected further improvement in the index to 2.5.
In July, the score had tumbled to -6.8 from 19.2 in the aftermath of the surprise 'Brexit' vote late June.
"The current ambiguity of economic impulses from Germany and abroad means that forecasts for the next few months are difficult. German exports, particularly to non-EU countries, as well as industrial production figures have disappointed," ZEW President Achim Wambach said.
"By contrast, the economic environment in the European Union is improving."
Overall, the ZEW Indicator of Economic Sentiment suggests that the economic situation in Germany will remain favourable in the coming six months, Wambach added.
The current situation index of the survey dropped to 55.1 from 57.6 in August. Economists had forecast a score of 56.
The economic sentiment indicator for the euro area increased by 0.8 points to a reading of 5.4 points, while the indicator for the current situation remained virtually unchanged at a level of minus 10.5 points, ZEW said.
Raising concerns over the growth outlook for the biggest euro area economy, German exports plunged in July at the fastest pace in nearly a year, official data showed last week. A sluggish global economy was partly to blame for the weakness. Further, economists pointed out that the effects of a weaker euro are fading.
Industrial production declined the most in nearly two years in July as weak demand from China and concerns about the 'Brexit' vote weighed on manufacturing activity. That added to the disappointment from the modest growth in factory orders in the same month.
The European Central Bank said the Eurozone economic recovery is expected to be dampened by still subdued foreign demand, partly related to the uncertainties following the UK referendum outcome, among others. The bank trimmed the growth projections for each of the next two years to 1.6 percent.
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