GERMANY - Germany could be in danger of a double-dip recession according to an influential economic indicator.
The Mannheim-based Centre for European Economic Research, (Zentrum für Europäische Wirtschaftsforschung, ZEW) has released its bleakest figures so far this year.
Economic sentiment nosedived by 19.2 points in November. It now stands at 4.2 points compared with 23.4 points in October.
Expectations for the eurozone economy again declined less than the German indicator. These now stand at 24.2 points compared to 34.3 points in October.
“This signals an increased risk of recession in Germany,” said the ZEW analysis.
“The need for the European Central Bank to focus on the eurozone as a whole, the uncertainties surrounding the geopolitical risks as well as financial analysts' fears concerning the future direction of German economic policy have all contributed to this decline.”
ZEW president Professor. Dr. Wolfgang Franz believed that the indicator also confirmed that a nose dive in economic activity is anticipated in the first half of 2003.
Some 312 analysts and institutional investors participated in the monthly survey.
Respondents were asked about their medium-term expectations concerning economic activity and capital markets.
The indicator shows the balance between positive and negative expectations regarding future economic activity within a timeframe of six months.
However, according to asset manager CDC IXIS, there could be a cyclical upturn in Germany soon.
The firm said this was based on an assumption that the economic cycle had ceased to deteriorate, as shown by the Belgian business climate index which leads the rest of the EMU area.
CDC IXIS said: “It is reassuring to note that this stabilisation has been caused by the two traditional drivers: export orders, which have increased; and industrial goods, whose production prospects have been improving faster.”
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