Investor confidence in Germany’s economy improved for a second month, while lingering at a level that will do little to dispel intensifying concerns over the country’s status as Europe’s growth laggard.
The ZEW institute’s gauge of expectations rose to -11.4 in September from -12.3 in August. While that’s better than economists in a Bloomberg survey had predicted, it’s still well below a longer-term average for the indicator. An index of current conditions worsened to -79.4.
“The brighter economic prospects for Germany align with a notably more optimistic view of international stock market developments,” ZEW President Achim Wambach said Tuesday in a statement. “This is, at least in part, attributed to the increasing proportion of respondents who anticipate stable interest rates in the euro zone and the US. Additionally, the experts expect a further easing of China’s interest-rate policy.”
Germany, which is more reliant on manufacturing than other advanced economies, has been struggling with falling demand for goods since the pandemic reopening and the energy shock caused by Russia’s invasion of Ukraine. Output stagnated in the second quarter after a recession in the preceding six months.
The European Commission on Monday lowered its growth forecast for the nation, predicting it to be the only big euro-zone economy to suffer a contraction this year. Such views are fueling worries that Germany is in for a period of sluggish performance due to challenges including high energy prices, demographics and the reshaping of global trade.
Also weighing on the outlook is inflation and the toughest monetary-tightening campaign in the European Central Bank’s history, which is meant to get prices back under control. Officials are meeting this week to decide whether to raise interest rates for a 10th straight time, with euro-area inflation lingering above 5%.
The commission still predicts Germany will rebound next year, notching expansion of 1.1%. EU Commissioner Paolo Gentiloni cautioned against too much pessimism, saying “this is a strong economy with the tools and the possibility to recover.”
