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Investor confidence in Germany's recovery dropped to the lowest level since late last year after a rise in infection rates stoked concerns over a possible tightening of pandemic curbs.
ZEW's gauge of expectations declined to 40.4 in August from 63.3 the previous month, with the institute's President Achim Wambach warning of “increasing risks” to the economy. A measure of current conditions improved.
Although more than half of Germany's population is fully vaccinated, coronavirus infections in Europe's largest economy are on the rise. The government has already tightened some travel rules and is set to discuss additional steps during a summit on Tuesday.
On top of that, German manufacturing -- a key part of the economy -- continues to suffer from global supply shortages and unprecedented delivery delays. Both have pushed up price pressures over the past months.
The Bundesbank predicts growth will pick up this quarter after output expanded 1.5% in the three months through June. It sees the economy on the verge of recovering the ground lost during the pandemic.
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