By February 2024
The economic outlook for Germany showed signs of improvement in February, even as concerns about the current state of the economy persisted, according to recent survey data.
Positive Sentiment for the Future
The ZEW Indicator of Economic Sentiment, which measures expectations for the next six months, rose by 4.7 points to reach 19.9 in February. This surpassed economists’ predictions of a smaller increase to 17.8. The survey respondents expressed optimism due to expectations of interest-rate cuts by the European Central Bank in response to falling inflation rates.
Rate Cuts Expected
More than two-thirds of the respondents believe that the European Central Bank will introduce interest-rate cuts over the next six months. Money markets are also pricing in a first rate cut at the central bank’s meeting in April, according to Refinitiv data.
Concerns Over Current Conditions
Despite the positive outlook for the future, the assessment of Germany’s current economic conditions decreased by 4.4 points, reaching minus 81.7 points. This was worse than anticipated, fueling concerns about the weakness of Europe’s largest economy.
Challenges Ahead
“The German economy is in a challenging position. The respondents’ assessment of the current economic situation has reached its lowest level since June 2020,” said ZEW President Achim Wambach.
Economists also expect a difficult start to 2024, as the German economy contracted by 0.3% in the final quarter of 2023. A rapid rebound in early 2024 is seen as unlikely.
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