Uncertainty clouds German investor morale

By Caroline Copley

BERLIN (Reuters) - The mood among German analysts and investors was unexpectedly subdued in September, a survey showed, suggesting the outlook for Europe's biggest economy remains tinged with uncertainty despite concern about the impact of Brexit having eased.

The economic sentiment index from Mannheim-based ZEW's monthly survey was unchanged in September from August's 0.5 points. The Reuters consensus forecast was for an increase to 2.5.

Mixed economic signals from Germany and abroad "mean that forecasts for the next few months are difficult," ZEW President Achim Wambach said in a statement.

The ZEW's gauge of current conditions fell to 55.1 points from 57.6 in August, also below the forecast of 56.0 by economists in the Reuters poll.

The weaker-than-expected readings follow a run of dismal data, raising questions about future growth as Germany grapples with the fallout from Britain's vote in June to leave the European Union as well as weak demand for its exports from non-EU countries.

Sales abroad unexpectedly plunged in July, while industrial orders barely rose and output posted its steepest drop in nearly two years.

Jennifer McKeown, senior economist at Capital Economics, said it was worrying that sentiment had not recovered as Brexit concerns had receded.

"The fact that the index is barely positive means that only a slim majority of investors see German economic conditions improving over the next six months," she said.

Wambach said he expected the economic situation in Germany to remain favorable over the next six months, supported by an improving picture in the EU.

The German economy grew by 0.4 percent in the second quarter, double the Reuters consensus forecast, having been expected to cool significantly after a mild winter helped it expand 0.7 percent between January and March, the strongest rate in two years.

The government has said it expects domestic demand to be the sole driver this year of economic growth it has pegged at 1.7 percent. For 2017 it predicts a slowdown to 1.5 percent.

Germany's DIW institute gave a more pessimistic outlook last week, predicting growth will nearly halve in 2017 as Brexit and other risks hit exporters.

The ZEW index was based on a survey of 205 analysts and investors conducted between Aug. 29 and Sept. 12.

(Reporting by Caroline Copley and Michelle Martin; Editing by Madeline Chambers and John Stonestreet)

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