German ZEW index slumps to minus 22.2 pts in Sept, lowest in nearly 8 yrs

The ZEW research institute said its economic expectations index for Germany plummeted 16.6 points to minus 22.2 points in September, the lowest level in nearly 8 years, amid concerns about weaker global and domestic demand.
The September index was the lowest since January 1999 and substantially worse than expected. Economists polled by AFX News had forecast a more modest drop to minus 6.9 points.
In its report, which measures the confidence of analysts and investors, ZEW said expectations about the German economy were dampened by concerns that weaker global demand will likely weigh on German exports.
Analysts and investors were also concerned the January 1, 2007 value-added tax (VAT) increase will weaken domestic demand early next year, ZEW said.
It added that investment projects are considered to become more expensive due to the restrictive monetary policy of the European Central Bank.
The ZEW said that while experts surveyed by the institute were more pessimistic about the future state of the German economy, the assessment of the country's current economic climate again improved.
The corresponding indicator rose to 38.9 points in September from 33.6 points in the month before.
"The gap between expectations and the current situation again indicates that the positive business climate is at risk," ZEW president Wolfgang Franz said in a statement.
"The German government should not ignore these alarm signals und redress the serious imbalances in its economic policy," he added.
The ZEW said economic expectations for the euro zone also declined considerably in September, falling 11.5 points to minus 10.2.
The indicator on the current economic situation in the euro zone rose by 5.6 points to 40.5.