German ZEW Economic Confidence Improves In May

German ZEW Economic Confidence Improves In May

May 11, 2022

Germany’s economic confidence improved in May but remained at a very low level as the economy is expected to continue to deteriorate in the near-term in the face of the war in Ukraine and the coronavirus restrictions in China, survey results from the ZEW – Leibniz Centre for European Economic Research showed on Tuesday.

The ZEW Indicator of Economic Sentiment unexpectedly rose to -34.3 in May from -41.0 in April. The reading was forecast to fall to -42.0.

Meanwhile, the current situation indicator fell by 5.7 points -36.5 in May. This was the third consecutive decline since the beginning of the war in Ukraine. The expected reading was -35.0.

The survey suggested that the economy will contract in the second quarter, Jack Allen-Reynolds, an economist at Capital Economics, said.

The ZEW economic expectations as well as the assessment of the situation continued to point to deterioration in the German economy over the next six months.

The financial market experts assessed that the situation will continue to deteriorate, but with less intensity.

The considerable corona restrictions in China lead to a significant deterioration in the assessment of the economic situation there, ZEW President Achim Wambach, said. This is a heavy burden for future economic growth in Germany.

In the current survey, a large majority of the experts expect the ECB to raise short-term interest rates in the next six months, Wambach added.

The experts’ expectations of economic development in the euro zone rose sharply by 13.5 to -29.5 points in May. By contrast, the current situation indicator fell to a new value of -35.0 points, down 6.5 points from April.

Inflation expectations for the Euro area dropped 36.5 points to -10.6 points in the current survey.

According to the survey conducted by the behavioral research institute Sentix, investor confidence in Germany declined to a two-year low in May amid fears of recession following the war in Ukraine. The investor confidence index dropped to -20.5 from -17.1 in April.

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