Investor pessimism in Germany worsened further in August as rising inflation and fears of a potential energy crisis caused by a slowdown in Russian gas supplies threaten the outlook for Europe's largest economy, writes Investing.com.
The ZEW Institute's index of economic sentiment fell to minus 55.3 in August, down from -53.8 in July. This is the lowest reading since 2011, when Europe was in the midst of a continent-wide debt crisis.
Therefore, financial market experts expect a further decline in Germany's already weak economic growth. Still high inflation and expected additional heating and energy costs lead to lower profit expectations for the private consumption sector, said Michael Schroeder, head of financial market research at ZEW.
Consumer prices in Germany jumped 8.5% in July compared with other eurozone countries. Germany's statistical office cited energy supply disruptions and supply chain delays, linked in part to strict COVID-19 blockages in China, as the main factors behind the price increase.
There are also growing fears that Germany's energy problems could worsen. With the main pipeline supplying Russian gas to Europe currently only 20 percent utilized, Germany's chief energy regulator has warned that businesses and households will have to cut fuel consumption by a fifth this winter to avoid potential supply shortages.