FRANKFURT – The forward-looking indicator for a leading measure of German of investor confidence surprised economists with a second straight decline in April, but the view of the present showed unexpected strength.
Germany’s ZEW economic thinktank said Tuesday that its April expectations measure for the coming six months dropped to 4.1 points, a stark decline from the 13.0 mark set last month and well below the market estimate of 15.1. After nearly a half year in negative territory, the indicator first returned to the black in January.
The current situation surprised to the upside with an increase to -32.5 points, the best performance since June of last year. The reading outpaced the market estimate of -40.0 and last month’s -46.5 result.
The pollster said financial market experts voiced similar opinions about the Eurozone, with the outlook on the decline and the view of the present in ascent.
Tuesday’s announcement followed last week’s poll results from Germany’s Sentix thinktank, which said its expectations component ticked higher and the current situation component improved to its best mark since June of last year.
German managers were gushing with confidence late last month, with the headline business climate index for Germany compiled by the country’s Ifo economics institute hitting its highest mark in 13 months.
What’s next?
A lack of clarity remains in Germany, according to ZEW President Achim Wambach. “The financial market experts are still uncertain.”
Improved prospects and ongoing concerns continue to battle for the upper hand, Wambach said. “Experts expect banks to be more cautious in granting loans. The still high inflation rates and the internationally restrictive monetary policy are also weighing on the economy. On the positive side, the danger of an acute international financial market crisis seems to have been averted: Earnings expectations for banks and insurance companies have improved compared to the previous month and are once again clearly in positive territory.”
EUR/USD dropped below 1.098 immediately after the announcement but pushed back above the mark as the session continued. The Dax 40 index of German blue chips was little changed by the news.
“As private consumption – due to ongoing real losses – and also the construction industry continue to suffer, German growth initially resembles the famous ride on the razor’s edge,” VP Bank Chief Economist Thomas Gitzel wrote. “The dangers of recession may not be acute in the short term, but if the production catch-up effects subside due to better functioning supply chains, there could still be trouble as the year progresses.
He added that ECB interest rate hikes are likely to occur during tough economic times, which means the “softening” ZEW outlook “therefore fits the picture.”
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session_info.http_referrer = data.http_referrer;
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- Expectations component down sharply as inflation persists
- Current situation measure hits 10-month high
- Analysts still unsure about economy’s direction
By Eric Culp, European Editor
LiveSquawk News
@EricCulpLS
18 April 2023| 09:40 GMT
FRANKFURT – The forward-looking indicator for a leading measure of German of investor confidence surprised economists with a second straight decline in April, but the view of the present showed unexpected strength.
Germany’s ZEW economic thinktank said Tuesday that its April expectations measure for the coming six months dropped to 4.1 points, a stark decline from the 13.0 mark set last month and well below the market estimate of 15.1. After nearly a half year in negative territory, the indicator first returned to the black in January.
The current situation surprised to the upside with an increase to -32.5 points, the best performance since June of last year. The reading outpaced the market estimate of -40.0 and last month’s -46.5 result.
The pollster said financial market experts voiced similar opinions about the Eurozone, with the outlook on the decline and the view of the present in ascent.
Tuesday’s announcement followed last week’s poll results from Germany’s Sentix thinktank, which said its expectations component ticked higher and the current situation component improved to its best mark since June of last year.
German managers were gushing with confidence late last month, with the headline business climate index for Germany compiled by the country’s Ifo economics institute hitting its highest mark in 13 months.
What’s next?
A lack of clarity remains in Germany, according to ZEW President Achim Wambach. “The financial market experts are still uncertain.”
Improved prospects and ongoing concerns continue to battle for the upper hand, Wambach said. “Experts expect banks to be more cautious in granting loans. The still high inflation rates and the internationally restrictive monetary policy are also weighing on the economy. On the positive side, the danger of an acute international financial market crisis seems to have been averted: Earnings expectations for banks and insurance companies have improved compared to the previous month and are once again clearly in positive territory.”
EUR/USD dropped below 1.098 immediately after the announcement but pushed back above the mark as the session continued. The Dax 40 index of German blue chips was little changed by the news.
“As private consumption – due to ongoing real losses – and also the construction industry continue to suffer, German growth initially resembles the famous ride on the razor’s edge,” VP Bank Chief Economist Thomas Gitzel wrote. “The dangers of recession may not be acute in the short term, but if the production catch-up effects subside due to better functioning supply chains, there could still be trouble as the year progresses.
He added that ECB interest rate hikes are likely to occur during tough economic times, which means the “softening” ZEW outlook “therefore fits the picture.”