German investor sentiment falls more than expected

Investor sentiment in Germany fell more than expected this month as economic expectations worsened following two straight years of recession, according to the Centre for European Economic Research in Mannheim, otherwise known as ZEW.

The headline ZEW Indicator of Economic Sentiment, which measures confidence among institutional investors, fell to just 10.3 in January, down from 15.7 in December and firmly below the consensus forecast of 15.4.

ZEW's president Achim Wambach said the decline was due to the "second consecutive year of recession" and could be due to recently released negative GDP growth figures and increasing inflationary pressure.

Nevertheless, the gauge measuring Germany's current economic situation rose slightly, up 2.7 to -90.4. However, that remains well below investors' assessment of the current state of the wider eurozone at -53.8, up 1.2 on the month.

"A lack of private household spending and subdued demand in the construction sector continue to stall the German economy. If these trends continue in the current year, Germany will fall further behind the other countries of the Eurozone," Wambach said.

"There is also greater political uncertainty, driven by a potentially difficult coalition-building process in Germany and the unpredictability of the economic policy pursued by the new Trump administration."