German Economic Expectations Darken Further

German economic sentiment worsened unexpectedly sharply this month, another signal of weakness in Europe’s largest economy as optimism continues to dwindle.

The closely watched ZEW Indicator of Economic Sentiment, which tracks analysts’ expectations for the economy in the next six months, fell 15.6 points on month to 3.6 in September, far below expectations of 15.5 from a forecast of economists polled by The Wall Street Journal.

The index has been in positive territory since November 2023, but the latest figures indicate that analysts judging Germany’s economy are now evenly balanced between optimists and pessimists, ZEW President Achim Wambach said.

“The hope for a swift improvement in the economic situation is visibly fading,” he added.

ZEW’s separate indicator of the current situation of the country’s economy also tumbled, reaching a level almost as bad as at the start of the pandemic in spring 2020, Deutsche Bank’s chief economist for Germany, Robin Winkler, noted.

Germany’s economy unexpectedly contracted in the second quarter of this year, and economists are expecting only moribund growth for the rest of 2024, as the country grapples with a persistent slump in its key industrial base.

Survey data for August showed deteriorating sentiment for business owners in the manufacturing sector, while elsewhere consumer confidence lapsed further as the one-off boost from the European soccer championship faded.

“The optimism from the spring has disappeared. A gloomy autumn is on the horizon,” Winkler continued.

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