Investor confidence in Germany’s economy improved only slightly, underlining its struggles to regain momentum after a recession.
(Bloomberg) — Investor confidence in Germany’s economy improved only slightly, underlining its struggles to regain momentum after a recession.
The ZEW institute’s gauge of expectations increased to -12.3 in August from -14.7 in July, better than economists in a Bloomberg survey had estimated. An index of current conditions fell substantially, however, to its lowest since October 2022.
“These heightened expectations need to be viewed in the context of a significantly worsened assessment of the current economic situation in Germany,” ZEW President Achim Wambach said Tuesday in a statement.
Respondents, by and large, don’t see further interest-rate hikes in Europe or the US, and the economic outlook for the US has seen a “significant increase,” he said. “These factors contribute to the improved expectations for Germany.”
While the 20-nation euro area has avoided a contraction, its biggest economy has only managed to stagnate since exiting a winter downturn brought on by its outsized manufacturing sector. Industrial production dropped more than expected in June, as low demand from China and higher interest rates weigh on activity.
German output will hardly grow for the remainder of the year, according to analysts surveyed by Bloomberg. That chimes with the International Monetary Fund’s prediction for it to be the only Group of Seven country to suffer a contraction across the whole of 2023.
The data — the first major indication of sentiment within the euro zone this month — come weeks before the European Central Bank decides whether to pause or continue its record bout of monetary tightening.
Officials must be “prudent” in bringing inflation back down to the 2% target without harming economic activity unnecessarily, Executive Board member Fabio Panetta said Aug. 3.
Policymakers are expected to raise rates one more time in September before starting to lower them in March, a Bloomberg poll this month showed.
–With assistance from Mark Evans and Joel Rinneby.
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