German ZEW Investor Confidence Set For 2nd Straight Drop
Is Europe's economic motor starting to sputter?

- Economic sentiment seen lower at 58.0 (prev 59.3)

- Current conditions forecast higher at -68.8 (prev -80.9)

- Sentix outlook shows minimal improvement

- Data due Tuesday at 09.00 GMT

 

By Eric Culp, European Editor

LiveSquawk News

@EricCulpLS

 

09.19 GMT

 

Frankfurt, 10 August 2020 (LS NEWS) – Financial market experts responding to the August ZEW survey are expected to express less optimism about the next six months as analysts warn of a flattening of Germany’s recovery curve.

 

Economists predict that the ZEW’s forward-looking economic sentiment index will decline for the second-straight month with a drop to 58.0 from 59.3 in July. The current sentiment indicator is expected to rise to -68.8 from last month’s -80.9 reading.

 

“The optimism for future improvement should be dampened somewhat by the recent global uptick in Covid-19 cases,” HSBC said.

 

Analysts have said the pace of the Germany’s rebound could be slowing, and a number of observers predict vacillations in the growth rate as the world continues to deal with the pandemic.

 

“While we are seeing early signs of plateauing in other high-frequency indicators, the financial market surveys might be an unsuitable gauge for the real economy in current times, given their forward-looking nature based on expectations as well as a marked disconnect from the real economy, in part aided by the ample monetary and fiscal easing put in place,” said Angel Talavera, head of Europe economics at Oxford Economics.

 

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, expressed above-average pessimism about this month’s ZEW results. “We reckon the headline ZEW investor expectations gauge fell to 40.0 in August, from 59.3 in July, reflecting the recent sideways price action in equities.”

 

Sentix reports slight uptick in outlook

On Monday, the German results from August’s Sentix poll showed a virtually unchanged forward-looking component (25.8 v 25.5) following July’s decline. This indicator, part of Sentix’s headline index, is a close match to the ZEW’s main reading.  

 

Sentix’s August headline index for Germany hit its highest level since February, the month before Berlin instituted its Covid-19 lockdown. But most of the gain this month came from the current conditions component, signaling significantly more confidence about the present than the future.