german zew april '19 econ sentiment preview
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  • Forward-Looking Headline Reading Set To Rise
  • Current Situation Expected To Decline
  • Possible Impact From Brexit Extension, Trump Trade Threats


Frankfurt, 14 April (LS NEWS) – German investors are expected to once again express increased concern about the present and more optimism about the future when the ZEW economics institute releases the results of its latest survey on Tuesday (0900 GMT)


The forward-looking economic sentiment index has been rising since November, and analysts predict it will continue the upswing and turn positive in April with a reading of 0.5 after beating expectations with an increase to -3.6 last month. The current situation index has been falling since October and is forecast to slip to 8.5 from 11.1, the lowest level since December 2014. Economic expectations for the Eurozone rose sharply to -2.5 in March.


Disparate investor views on the now and the future are nothing new and already have recent precedent: Sentix’s April headline index of German investor confidence released on 8 April dropped to its lowest level since August 2012, with the current situation component falling a sixth month in succession as the expectations component rose for the third straight time.

Source: ZEW
Source: ZEW


Good News, Bad News


This month’s survey results could receive some support from the European Union’s decision to delay Brexit until 31 October, which provides the UK with more time to hammer out a deal. Conversely, further threats of additional threats on EU goods by US President Donald Trump may sour the moods of ZEW poll respondents.


Oxford Economics said headline ZEW sentiment is “likely to improve moderately, driven by a gradual recovery in expectations from their recent lows. This would continue the signals that we have been getting from other global surveys as well as the Sentix index.”


In a note, Danske Bank said: “We see a small upside to the German expectations print based on the recent data points (from e.g. China) and expect the current situation to stabilise around its current level.


“In contrast to the weak data points from manufacturing PMIs, the German Ifo showed its first rebound in March since August 2018. The Ifo is typically a more reliable leading indicator of GDP than the PMIs, and hence paints a more optimistic picture of the German economy.”


The results from the next Ifo survey of German managers are due on 24 April. Despite last month’s turnaround, the manufacturing component recorded its worst reading in more than six years, adding further concern about the health of the industrial sector in Europe’s largest economy.


---Eric Culp

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