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Is economic pessimism in Germany finally improving?

The German flag on top of the Reichtstag building in Berlin, Germany. Aug. 31, 2023.
The German flag on top of the Reichtstag building in Berlin, Germany. Aug. 31, 2023. Copyright Michael Probst/AP.
Copyright Michael Probst/AP.
By Euronews
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German investors are more hopeful than expected as analysts predict a continued decline in inflation.

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Economic sentiment in Germany rose from -1.1 points in mid-October to 9.8 points in mid-November, according to data published by the ZEW economic research institute on Tuesday.

The declining figure is an indicator of decreased pessimism as numbers above 0 signify financial optimism and numbers below 0 indicate a negative outlook.

ZEW interviewed up to 300 experts from banks, insurance companies, and financial departments of selected corporations about their six-month predictions for the economy, inflation rates, interest rates, stock markets, as well as exchange rates.

Analysts polled by Reuters had expected a November reading of 5.0, meaning German investors have proved more optimistic than predicted.

Why the outlook in Germany is less gloomy

ZEW’s expectations index for Germany has been on the rise for four consecutive months.

Between June and July of this year, it fell from -8.5 to -14.7 points, but the figures have been less gloomy since this drop.

This is partially thanks to falling fuel prices and predictions that inflation will continue to decrease, which is likely to prevent dramatic interest rate hikes.

“The heightened economic expectations are accompanied by significantly more optimistic outlooks for the German industrial sector and both domestic and foreign stock markets,” said ZEW President Professor Achim Wambach.

Yet despite these positive predictions, ZEW data shows that investors’ current perception of the German economic situation remains pessimistic.

The assessment measuring the current situation barely changed month-on-month, rising by 0.1 points to -79.8.

This negative sentiment may not be without basis. While inflation is falling in Germany,the country is still struggling with high fuel costs linked to Russia’s war in Ukraine.

A slowdown in China’s economy has also impacted Germany's trading, as the nation is a key market for German exports.

To take a step outwards, ZEW noted that investor sentiment concerning economic development in the eurozone rose dramatically in November.

The indicator was recorded at 13.8 points, a 11.5 point rise compared to the previous month.

In contrast, the situation indicator for the eurozone, which looks at current perceptions, dropped by 9.4 points to a new reading of -61.8 points.

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