German Investor Outlook Poised to Edge Higher In May
The ZEW headquarters in Mannheim, Germany.

- Economic sentiment forecast at 33.5 (prev 28.2)

- Current conditions projected at -87.8 (prev -91.4)

- Data due Tuesday at 09.00 GMT

 

Frankfurt, 18 May 2020 (LS NEWS) – German Investor optimism about the near future is expected to increase incrementally as Europe’s largest economy continues to loosen its pandemic lockdown, but opinions about the present environment will likely remain near their lowest level in a decade.

 

An economists’ poll forecasts the forward-looking ZEW’s economic sentiment index at 33.5,  a slight increase from the April’s 28.2 reading. Last month’s number was the highest since mid-2015 but followed March’s dismal -49.5 result, the worst showing since December 2011.

 

The current situation index for May is expected to rise slightly to -87.8 from last month’s -91.5, the lowest reading since May 2009.   

 

In early Monday trading, the Dax 30 index of German blue-chip stocks was still more than 20pct below the  post-lockdown high set in late April.

 

And the US Federal Reserve warned Friday that markets aren’t out of the woods yet. “Asset prices remain vulnerable to significant price declines should the pandemic take an unexpected course,” it said in a statement.

 

 

A V-shaped recovery for the ZEW index, at least for the moment.

Skittish mood

 

Nomura said, “In a similar way to the euro area PMIs, we expect Germany’s ZEW to improve compared with the previous month in both its current situation and expectations components. The expectations component likely moved higher in May as prospects of a recovery have become more plausible and the German economy exits lockdown more quickly than other European countries.”

 

Oxford Economics said this month could go either way. “The ZEW index could follow the earlier-released Sentix index and show a recovery in economic expectations, although we worry that last month’s move was premature and a modest fallback may be on the cards for now.”

 

Sentix poll results often serve as a bellwether for the ZEW survey, and they offered a mixed bag. The expectations component showed a slight rebound, but the current situation reading recorded its fourth consecutive decline as it fell to an all-time low.  

 

“There is now a danger that recessionary tendencies will become entrenched if the economy is too slow to recover,” Sentix said.

 

Investors have reason to be concerned about the present. Germany fell into recession with a 2.2pct contraction in first quarter. The world’s fourth-largest economy is expected to shrink even more this quarter, a period so far charaterised by various forms lockdown.

 

However, the German downturn has been much less pronounced than economic contractions in France, Italy, and Spain, Europe’s other major economies.