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Spend more at home, OECD tells Germany as investor mood darkens

Reuters  |  BERLIN 

By Joseph and Michael Nienaber

(Reuters) - The mood among German investors is at its darkest in years with a tariff attack on the county's exports largely to blame, a survey showed, as one global economic body said the solution lay in spending more at home.

The research institute's sentiment index fell to -16.1 in June from -8.2 in May, it said on Tuesday - the lowest reading since September 2012 and missing a consensus forecast of -14.0 in a survey.

Weighing on morale were concerns about the new Italian government's commitment to the euro zone, but of potentially far greater immediate economic impact was a festering trade dispute with the

Washington's allies have warned that protectionist policies espoused by - including punitive import tariffs on and aluminium - are weakening the world economy.

But as Europe's biggest exporter to the - a trade relationship that keeps more than one million Germans in employment - is more anxious than most to avoid a trade war with

said the dispute was leaving its mark on the economic outlook, and falls in German exports, industrial output and orders in April also suggested a long sustained recovery could be flagging.

But the said on Tuesday the upswing remained strong and the government should use its budget surplus to increase investment.

"Your current account got fat because you won productivity and competitiveness compared to the others in Now, does that give rise to protectionists? Of course!" told reporters in

"So basically, you could spend more, yes! You could import more, yes!"

Germany's has faced similar criticism from the and its euro zone partners, and Trump has partly justified his tariffs by pointing to the U.S. trade deficit with

But he stunned a broader constituency of U.S. allies at the weekend when he backed out of a joint communique in that mentioned the need for "free, fair and mutually beneficial trade" and the importance of fighting protectionism.

DRIVEN HARD

While the also runs a trade deficit with the EU as a whole, the impact of protectionist moves risks being particularly acute for Germany, with a heavily reliant on transatlantic trade particularly vulnerable.

Trump has threatened to use national security laws to impose tariffs on car and truck imports.

German carmakers are also struggling to shake off an emissions scandal that has dented their reputation and could cost billions of euros to refit diesel vehicles with greener exhaust filters.

The survey was taken in the two weeks running up to Monday, which could mean concerns about were more prominent in some respondents' minds.

The new government in comprises anti-establishment parties with a brief to shake up EU institutions, though its said at the weekend the country was committed to the single currency.

A separate gauge measuring investors' assessment of the economy's current conditions dropped to 80.6 from 87.4 last month. The consensus forecast was for 85.0.

"On the face of it, the ZEW index suggests ...(a German) recession is a significant risk," of wrote in a note.

"But note that its past relationship with GDP growth has been very weak and we would not draw any firm conclusions from a particular level," she adding, predicting economic growth of around 2 percent up to end-2019.

That chimes in with an early-June consensus among economists that a consumption-driven upswing will continue and, with financial markets showing no discernible reaction to Tuesday's data, that view appears not to have shifted significantly.

The predicted German growth of 2.1 percent this year and next.

Gurria said should take criticism of its persistently large current account surplus seriously and address the imbalances it caused.

(Editing by and John Stonestreet)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, June 12 2018. 19:19 IST
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