COVID Curbs, supply problems darken German investor Morale

German investor sentiment deteriorated in December as a fourth wave of COVID-19 infections and persistent supply bottlenecks in manufacturing clouded the growth outlook for Europe's largest economy, a survey showed on Tuesday.

The ZEW economic research institute said its economic sentiment index fell to 29.9 from 31.7 points in November. A Reuters poll had forecast a steeper fall to 25.1.

"The German economy is suffering noticeably from the latest developments in the COVID-19 pandemic," ZEW President Achim Wambach said in a statement, adding that persistent supply bottlenecks were weighing on production and retail trade.

The index for current conditions dropped to -7.4 from 12.5, compared with a consensus forecast for 5.0.

"The decline in economic expectations shows that hopes for much stronger growth in the next six months are fading," Wambach said, adding that earnings expectations had soured particularly among export-oriented and consumer-related industries.

Recent economic data has painted a mixed picture of the German economy at the start of the final quarter of 2021.

While weaker demand from abroad drove a much bigger than expected drop in industrial orders in October, factory output rose more than expected in the same month due to higher production in the car industry.

A pandemic-related scarcity of microchips and other electronic components has caused massive supply bottlenecks and production problems in Germany's mighty automobile industry and other important sectors of the economy.

©Photo: AP Photo/Michael Probst