Latest data from the ZEW institute shows that the economic sentiment index rose by 7.9 percentage points this month to 34.2 points, growing for the fourth consecutive month. Sentiments improved the most in the automotive, chemical, and machinery manufacturing sectors.
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“Investor confidence in the German economy continues to grow,” said LBBW bank analyst Elmar Voelker. “This is no longer just an improvement in future prospects; the current situation assessment also shows greater progress than expected.”
The investors’ current situation assessment index jumped by 16.2 points, which drove the overall index growth and exceeded analysts’ expectations, according to a survey conducted by the financial data platform FactSet.
The improvement in investor sentiment coincides with a series of better-than-expected data, which has strengthened hopes that Germany can cope with the consequences of the Middle East war and the resulting disruptions in energy and petrochemical supply chains.
Germany’s statistics office earlier this month reported that the volume of industrial sector orders, which indicates future business activity, grew much faster in June than expected.
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Since the end of 2022, when pent-up demand erupted after the COVID-19 pandemic, the German economy has practically not grown, and ZEW survey participants still view the current situation negatively.
Although Chancellor Friedrich Merz promised to borrow and spend hundreds of billions of euros to renew worn-out infrastructure, some economists warn that money alone will not be enough without potentially painful social security system reforms and deregulation.
“It is still unclear whether these positive changes will be enough to ensure a sustainable recovery after the economic downturn,” said E. Voelker.
The ZEW institute surveyed 185 analysts and institutional investors in August.
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