FRANKFURT – Investors in Germany expressed more hope about the country’s prospects due to the policies of the new government in Berlin and an apparent US willingness to lower some of its trade tariffs, according to a poll administered by a leading economic institute.
Germany's ZEW thinktank said Tuesday that its May expectations indicator for the country in the coming half-year jumped to 25.2 points to handily outpace the estimate of 11.3 and April’s -14.0. Last month’s reading was the lowest since July 2023 and resulted from a historic drop of over 65 points. Despite this month’s rebound, the latest indicator was still less than half of the 51.6 mark posted in March.
The current conditions indicator fell for the first time since November, dropping to -82.0 points and short of the -77.0 estimate and -81.2 last month.
“Expectations are brightening,” said ZEW President Achim Wambach. “The ZEW indicator sees a major improvement in May 2025 and compensates for part of the losses observed in the April survey. With a new government in place, some progress in the tariff disputes and a stabilising inflation rate, optimism has increased.”
The expectations index for the Eurozone surged to 11.6 points from -18.5 from last month, the ZEW said. It stood at 39.8 in March.
EUR/USD and the DAX 40 index of German blue chips were little changed immediately after the announcement.
Source: ZEW
New government, new hopes
The ZEW results followed last week’s survey of investors conducted by Sentix. It said expectations turned positive, and the current conditions measure rose for a third straight month to its best mark since July.
The improved optimism about Germany’s future came after Conservative Friedrich Merz was elected chancellor as expected last week. But Merz failed to drum up enough support during the first round of voting and suffered an unprecedented initial defeat. This had many analysts questioning the strength of the incoming coalition of Merz’s centre-right Christian Democrats, their Bavarian partner the Christian Social Union, and the left-centre Social Democrats, who led the tripartite coalition that imploded in November.
Merz was a driving force behind an 11th hour move in the former lower house to change the country’s “debt brake”, which has opened the door for a plan that would invest some EUR 1 tn in German infrastructure and defence, spending expected to breath live into the country’s faltering economy.
The US-UK trade agreement announced last week eased some of Washington’s tariffs on a few British goods, adding some optimism about the global trade situation during the ZEW polling period.
The decision by the US and China to back down from their most exorbitant trade levies came late for ZEW survey respondents and likely played a minor role if any in the results.
The US has implemented a range of tariffs on the EU that impact member states such as Germany, including 25% levies on steel, aluminium, and cars, and 10% on virtually all other products. The latter fee could climb to 25% if Washington reinstates its “reciprocal” tariffs in July.
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- View of present worsens
- Expectations regain some ground after April drop
- Domestic stimulus plans support hopes
- Possible trade normalisation fuels optimism
By Eric Culp, European Editor
LiveSquawk News
@eculp.bsky.social
@EricCulpLS
13 May 2025 | 10:00 GMT
FRANKFURT – Investors in Germany expressed more hope about the country’s prospects due to the policies of the new government in Berlin and an apparent US willingness to lower some of its trade tariffs, according to a poll administered by a leading economic institute.
Germany's ZEW thinktank said Tuesday that its May expectations indicator for the country in the coming half-year jumped to 25.2 points to handily outpace the estimate of 11.3 and April’s -14.0. Last month’s reading was the lowest since July 2023 and resulted from a historic drop of over 65 points. Despite this month’s rebound, the latest indicator was still less than half of the 51.6 mark posted in March.
The current conditions indicator fell for the first time since November, dropping to -82.0 points and short of the -77.0 estimate and -81.2 last month.
“Expectations are brightening,” said ZEW President Achim Wambach. “The ZEW indicator sees a major improvement in May 2025 and compensates for part of the losses observed in the April survey. With a new government in place, some progress in the tariff disputes and a stabilising inflation rate, optimism has increased.”
The expectations index for the Eurozone surged to 11.6 points from -18.5 from last month, the ZEW said. It stood at 39.8 in March.
EUR/USD and the DAX 40 index of German blue chips were little changed immediately after the announcement.
New government, new hopes
The ZEW results followed last week’s survey of investors conducted by Sentix. It said expectations turned positive, and the current conditions measure rose for a third straight month to its best mark since July.
The improved optimism about Germany’s future came after Conservative Friedrich Merz was elected chancellor as expected last week. But Merz failed to drum up enough support during the first round of voting and suffered an unprecedented initial defeat. This had many analysts questioning the strength of the incoming coalition of Merz’s centre-right Christian Democrats, their Bavarian partner the Christian Social Union, and the left-centre Social Democrats, who led the tripartite coalition that imploded in November.
Merz was a driving force behind an 11th hour move in the former lower house to change the country’s “debt brake”, which has opened the door for a plan that would invest some EUR 1 tn in German infrastructure and defence, spending expected to breath live into the country’s faltering economy.
The US-UK trade agreement announced last week eased some of Washington’s tariffs on a few British goods, adding some optimism about the global trade situation during the ZEW polling period.
The decision by the US and China to back down from their most exorbitant trade levies came late for ZEW survey respondents and likely played a minor role if any in the results.
The US has implemented a range of tariffs on the EU that impact member states such as Germany, including 25% levies on steel, aluminium, and cars, and 10% on virtually all other products. The latter fee could climb to 25% if Washington reinstates its “reciprocal” tariffs in July.
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