Financial market experts are feeling more positive about the German economy in September, according to the latest sentiment reading from ZEW, the Leibniz-based Centre for European Economic Research.
The ZEW indicator of economic sentiment climbed 5.9 points this month, from August, to 77.4 points. The assessment of the economic situation in Germany also improved, now sitting at minus 66.2 points — 15.1 points higher than in August.
“The ZEW Indicator of Economic Sentiment has increased again, signalling that the experts continue to expect a noticeable recovery of the German economy,” said ZEW president Achim Wambach in a statement.
“Stalled Brexit talks and rising COVID-19 cases could not dampen the positive mood,” he added. “However, the still-negative outlook for the banking sector reveals fears of a rising number of loan defaults in the coming six months.”
The positive mood in the face of the risk of a no-deal Brexit may not be shared by everyone, however. According to the managing director of the Association of German Chambers of Industry and Commerce, Martin Wansleben, “there is growing concern in the economy that the Brexit negotiations will fail.”
Wansleben warned in an interview on Monday (14 September) that the automotive industry alone faced billions of euros in tariffs without an EU-UK trade agreement.
ZEW said on Tuesday that market experts’ morale on economic development in the eurozone looking ahead was up 9.9 points in September, to 73.9. But assessment of its current state, whilst improving, is still minus 80.9 points.
“The outlook for the eurozone has thus also improved noticeably, albeit to a lesser extent than for Germany,” ZEW said.
Germany’s federal statistics office said on Tuesday that the German economy was back on a growth path after its slump in the first half of the year due to the COVID-19 pandemic.
German GDP contracted by 9.7% in the second quarter of 2020, compared with the same period in 2019.
The government recently revised its forecast for 2020 to a decline of 5.8%, after previously forecasting a 6.3% contraction.
“The recession in the first half of the year was less severe than we had feared,” economy minister Peter Altmaier said in Berlin last week, adding that post-lockdown recovery is going “faster and more dynamically than we dared hope.”
“The improved mood among companies and the reduction in short-time work suggest that the recovery process will continue in the coming months, although it may take some time,” the economics ministry said.
However, Germany is more pessimistic about next year, forecasting growth of just 4.4%, down from its previous expectation of 5.2%.