Investor Confidence in Germany’s Economy Plummets
The ZEW Institute, a German economic research organization, has reported a sharp decline in investor confidence regarding Germany’s economy. The index tracking business sentiment, published on August 13, has dropped to 19.2 points in August, down from 41.8 in July. This marks the lowest level since January and is attributed to disappointing data and recent turbulence in global stock markets. The last time investor expectations deteriorated in a similar manner was in July 2022.
The assessment of the current state of the German economy has also declined, falling by 8.4 points from July to minus 77.3 points. Professor Achim Wambach, the director of ZEW, commented, “Germany’s economic outlook is cracking.” He added that “economic expectations are likely still influenced by a high degree of uncertainty, exacerbated by ambiguous monetary policy, disappointing business data from the United States, and growing concerns over escalating conflicts in the Middle East.”
Furthermore, ZEW has noted a significant deterioration in economic expectations for the eurozone, the United States, and China, which has particularly affected export-dependent sectors in Germany. The index reflecting financial market experts’ attitudes towards the economic development of the eurozone has erased 25.8 points from its July assessment, now standing at 17.9 points. This represents the steepest decline since April 2020.
Recent data for Germany paints a bleak picture for the largest economy in Europe, which saw its GDP shrink by 0.1% in the second quarter compared to the first. Figures for private sector activity and business climate in July also fail to provide much reassurance. However, there are some results that inspire optimism: factory orders and industrial production both increased in June. Nonetheless, the ongoing weakness in exports indicates potential issues for the industrial sector, and corporate bankruptcies are on the rise.
“The ZEW survey reinforces the impression that the German economy is still struggling to regain its footing,” commented Robin Winkler, an economist at Deutsche Bank. He noted that current assessments have deteriorated again after a slight improvement in the spring. Winkler expressed concern that “the optimism regarding the country’s economic outlook that emerged in the spring has completely evaporated.”
