Cloudy outlook for the German economy (FT)

The outlook for Germany's slowly recovering economy has clouded, according to a monthly survey of financial analysts released yesterday.

The ZEW indicator fell by 12.2 points to 37.8 - the fifth fall in a row since hitting a high of 71 in January - and in contrast to the upbeat business sentiment surveys and positive macroeconomic data released in recent weeks.

The ZEW institute listed poor stock market performance, the appreciation of the euro, higher oil prices, and the European Central Bank's policy of raising interest rates as the main reasons behind the pessimism about Germany's heavily export-dependent economy.

Analysts had moved be-yond the expected short-term rise in retail sales in advance of a planned three-point increase in value added tax next January and were now focusing on the slowdown in demand that the VAT rise could cause next year, it said.

But several of the experts who participate in the survey of 330 financial analysts said the results should be put into perspective, pointing out the high volatility of the poll.

Erik Sonntag, of ING Bank, said he remained positive about Germany's gross domestic product in the short term and continued to forecast accelerating growth in the second quarter.

The Ifo sentiment index, which polls more than 7,000 companies, and recent Purchasing Managers surveys are close to their record highs. Export and industrial production statistics show Germany's manufacturers have so far weathered the euro's appreciation, while robust retail sales in April hinted at a rebound in consumer spending.