German investor sentiment unexpectedly fell in June on dimmer expectations about the outlook for Europe's largest economy, a survey by the ZEW economic think tank showed today.
The institute said its economic sentiment indicator, based on a survey of 293 analysts and institutional investors, fell to 20.3 in June from 24 in May. A Reuters poll of economists had pointed to a reading of 29.
The euro fell, European shares pared gains and bond yields fell after the release of the reading.
The European Central Bank raised interest rates to a near six-year high of 4 per cent earlier this month and showed its readiness to increase them again to combat inflationary dangers in a strongly expanding economy.
A separate ZEW gauge of current conditions for Germany rose to 88.7 this month from 88.0 in May. The consensus forecast was for a reading of 87.5.
"The assessment of the current economic situation is still excellent, but the economic development of Germany is not expected to further gain momentum," ZEW President Wolfgang Franz said in a statement.
The German economy grew 0.5 per cent in the first quarter of this year despite the impact of a January 1st value-added tax rise. Economists widely expect full-year growth to come close to matching last year's six-year peak of 2.8 per cent.
But the economy has shown some signs of running up against its limits. Industrial production suffered its biggest fall in nearly seven years in April, and retail spending edged up only tentatively.