German Investor Confidence May Have Declined to Lowest in Year

(Bloomberg) -- Investor confidence in Germany, Europe's largest economy, probably fell to the lowest in a year in November after crude oil rose to almost $100 a barrel and the euro reached a record, a survey of economists shows.

The ZEW Center for European Economic Research may say its index of investor and analyst expectations dropped to minus 20, the lowest since November 2006, from minus 18.1 last month, according to the median of 38 forecasts in a Bloomberg News survey. ZEW will publish the report at 11 a.m. in Mannheim today.

The euro has risen 8 percent against the dollar in the past three months and reached a record $1.4752 last week, eroding the competitiveness of German exports, while higher energy bills have sapped companies' and consumers' spending power. German business confidence dropped to a 20-month low in October and the DAX index of 30 shares is down 3 percent this month.

``High oil prices, the euro's strength and ongoing uncertainty in financial markets are clouding investor sentiment,'' said Lutz Karpowitz, an economist at Bayerische Landesbank in Munich. ``I doubt household spending will be able to compensate for the negative economic impact of slowing global demand.''

Germany's export-driven economy will grow 1.9 percent next year after expanding 2.6 percent in 2007, the German government's council of economic advisers said last week, citing the euro's strength and a U.S. slowdown. The economy expanded 2.9 percent last year, the most since 2000.

Euro, Oil

Bayerische Motoren Werke AG, the world's largest maker of luxury cars, on Nov. 6 reported pretax profit that was lower than analysts had estimated, as a stronger euro reduced the value of U.S. sales and raw-material costs rose.

Crude oil has advanced almost 90 percent since mid-January and traded at $95.33 a barrel in New York yesterday.

The European Central Bank on Nov. 8 kept its benchmark interest rate at 4 percent, even after inflation accelerated to the fastest pace in two years. The bank said it needs more time to assess the economic impact of the U.S. housing slump, which has made banks reluctant to lend and pushed up credit costs.

Citigroup Inc., the biggest U.S. bank by assets, said Nov. 4 it may face an additional $11 billion of writedowns on subprime mortgages and related holdings.

Still, Deutsche Bank AG, Germany's biggest bank, said Oct. 31 the fourth quarter began ``very positively'' and reiterated its profit forecasts.

German exports also rose more than economists expected in September, supported by sales in Asia and the 13-nation euro region.

Exports by German chemical makers, including BASF AG and Bayer AG, climbed 9.5 percent in the third quarter, driven by sales to east Asia and Latin America, the VCI chemical industry association said Nov. 1.

``We're optimistic that positive impulses from exports will continue until the end of the year and that the domestic economic upswing won't slow down significantly,'' the association said.