German economic sentiment worsened in June amid the escalation in trade tensions with the U.S. and fears the new Italian government could adopt anti-EU policies and destabilize financial markets, the ZEW survey showed.
The ZEW indicator of economic sentiment for Germany fell to its lowest level since September 2012, decreasing by 7.9 points from May to negative 16.1. The assessment of the current economic situation declined by 6.8 points to 80.6.
"German industry has been reporting worse than expected figures for exports, production and incoming orders for April. As a result, the economic outlook for the next six months has worsened considerably," ZEW President Achim Wambach said.
"While the German economy is slowing, the situation is considerably better than the survey suggests," said Jennifer McKeown, chief European economist at Capital Economics. "The survey was taken in the two weeks running up to yesterday, so most responses will have been from a time when worries about Italy were more intense than they are now."
The German economy is expected to continue to expand at around 2% this year and the next, McKeown said.
Financial markets experts' expectations regarding the eurozone's economic situation dropped even more sharply than those for Germany, falling by 15.0 points to negative 12.6 in June, ZEW said, blaming a significant decline in the assessment of Italy's economy. The indicator for the current economic situation in the eurozone dropped by 16.2 points to 39.9 points.
