German Economy Hurt by Volkswagen Scandal

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The FINANCIAL — The German economy weakened in October, a survey of financial analysts and investors showed on October 13, as the Volkswagen emissions scandal and uncertainty in emerging markets dampened sentiment in Europe’s biggest economy, according to Nasdaq.

The ZEW think tank said that its indicator of economic expectations fell to 1.9 from 12.1 in September. Economists polled by The Wall Street Journal had forecast a smaller decline to 6.9.

The current conditions index fell to 55.2 in October from 67.5 in September.

“The exhaust gas scandal of Volkswagen and the weak growth of emerging markets has dampened economic outlook for Germany,” said ZEW President Clemens Fuest.

“However, the performance of the domestic economy is still good and the euro area economy continues to recover. This makes it rather unlikely that the German economy will slide into recession,” he said.

Because the ZEW index is based on a survey of financial analysts, it is heavily influenced by conditions in financial markets. Economic forecasters typically rely on surveys of businesses such as the purchasing managers index and Ifo business survey to gauge the underlying strength or weakness of the economy.

 

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