Investor confidence in the German economy falls for a fourth month in September

Investor confidence in the German economy waned for a fourth month in September after the worsening infection rates and global supply disruptions threatened to disrupt Europe s strong recovery.

The ZEW institute's gauge of expectations fell to 26.5 from 40.4 in the previous month, the lowest in 2 years. The outlook for the Euro zone also deteriorated, after the economy grew faster than originally reported in the second quarter.

Cases of Coronavirus are on the rise around the world. Most countries in Europe, where 77% of the adults population have received at least one shot, have signaled that there won t be any lockdowns similar to the ones which paralysed the economy last year.

Yet retailers and hospitality providers may still suffer if consumers see themselves wary of going out. Private consumption was the main growth driver in the second quarter of 2016. It was also the main drag in the previous six months.

Meanwhile, the fortunes of export-reliant manufacturers are partially tied to decisions by governments elsewhere. Outbreaks in Asia have triggered temporary curbs over the past weeks, amplifying supply shortages and delays that were once considered strict.

Herbert Diess, the chief executive officer of Volkswagen AG, warned today that semiconductors will be hard to come by for years - a scenario which would pose a significant challenge for the economy.

Global chip shortage in the construction sector and inventory of building materials in the automotive industry have caused a significant reduction in profit expectations for these sectors, said ZEW President Achim Wambach in a statement. The study has had a negative effect on economic expectations. ZEW said its survey suggests that economic growth in Germany over the next six months will be just slightly faster than observed now. In the second quarter, the period when data are last available, output expanded 1.6%.

As a result of the bottlenecks, input prices have surged and businesses are increasingly passing them on to their clients, mounting pressure on the European Central Bank to reassess its inflation outlook.

This week policy makers meet to discuss immediate forecasts and the region s new need for monetary stimulus. Most economists expect the ECB to slow its bond buying rate in the coming quarter after a strong performance in the first half.

In June, the economy grew 2.2% during the three months of summer. While public consumption contributed the lion s share, government expenditure and investment also boosted output.