(Bloomberg) -- Investor sentiment in Germany’s economy fell for the first time in six months as concerns over risks in the banking sector add to headwinds from inflation faced by companies and households. 

The ZEW institute’s gauge of expectations dropped to 13 in March from 28.1 in the previous month. That’s even worse than the median estimate for 15 in a Bloomberg poll of economists. 

“The international financial markets are under strong pressure,” ZEW President Achim Wambach said Tuesday in a statement. “The assessment of the earnings development of banks has deteriorated considerably, although it still remains slightly positive. The estimates for the insurance industry have also declined significantly.”

Germany’s economy will probably shrink in the first three months of the year, though by less than the 0.4% drop in output in the final three months of last year, the Bundesbank said on Monday. The economy ministry has highlighted that while a recession can’t be excluded, data are showing signs of improvement. 

Industrial production and factory orders turned out better than expected at the start of the year, though consumers are still weighed down buy stubborn inflation. While the headline number for price gains is declining after a drop in energy costs, underlying pressures are proving more persistent. 

The ZEW survey was conducted March 13-20. 

--With assistance from Joel Rinneby and Kristian Siedenburg.

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