Aerial photo shows the main railway station Hauptbahnhof in Berlin, Germany, May 29, 2016. Picture: REUTERS/ HANNIBAL HANSCHKE
Aerial photo shows the main railway station Hauptbahnhof in Berlin, Germany, May 29, 2016. Picture: REUTERS/ HANNIBAL HANSCHKE

Berlin — The mood among German investors has sunk to its lowest in nearly six years, a survey has showed, weighed down by a festering trade dispute with the US and concerns about Italy’s commitment to the eurozone.

The ZEW research institute’s indicator fell to -16.1 in June from -8.2 in May, it said on Tuesday. This was its lowest level since September 2012 and missed a consensus forecast of -14.0 in a Reuters survey.

World leaders and global economic institutions are warning that protectionist policies espoused by US President Donald Trump — including the imposition of punitive import tariffs on steel and aluminium — are casting a dark cloud over the world economy. But as Europe’s biggest exporter to the US — a trade relationship that keeps more than 1-million Germans in employment — Berlin is desperate to avoid a trade war with Washington.

"The latest escalation in the trade dispute with the US and fears about policies by the new Italian government that could destabilise the financial system are leaving their mark on the outlook for Germany," ZEW president Achim Wambach said in a statement.

Trump stunned US allies at the weekend when he backed out of a joint communiqué agreed by G-7 leaders in Canada that mentioned the need for "free, fair and mutually beneficial trade" and the importance of fighting protectionism.

The new government appointed this month in Italy comprises anti-establishment parties that have promised to shake up the EU, though its economy minister said at the weekend the country was committed to the single currency.

The ZEW survey was taken in the two weeks running up to Monday, which suggests most respondents sent their assessment at a time when concerns about Italy were more prominent than those about trade.

"On the face of it, the ZEW index suggests that German growth will decelerate sharply and that recession is a significant risk," Jennifer McKeown of Capital Economics 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."

A separate gauge measuring investors’ assessment of the economy’s current conditions dropped to 80.6 from 87.4 last month. The Reuters consensus forecast was for 85.0. There was no discernable financial market reaction to Thursday’s data.

Reuters