Data published by the Leibniz Centre for European Economic Research (ZEW) showed that the indicator of German economic sentiment declined sharply in January after reaching its highest level since August 2024 in December. The drop was caused by another contraction of the German economy in 2024 and increased inflationary pressures. However, the assessment of the current economic situation in Germany has changed only slightly in January.
According to the report, the indicator of economic sentiment fell to 10.3 points compared to 15.7 points in December. The index remains in positive territory for the 15th month in a row. Economists had expected the index to fall to 15.3 points. Meanwhile, the index of the current economic situation rose to -90.4 points from -93.1 points in December. Consensus estimates suggested a decrease to -93.0 points.
“The second consecutive year of recession caused economic expectations in Germany to fall. This could be, among others, due to the recently released negative GDP growth figures and increasing inflationary pressure. A lack of private household spending and subdued demand in the construction sector continue to stall the German economy. If these trends continue in the current year, Germany will fall further behind the other countries of the Eurozone,” said ZEW President Professor Achim Wambach.
The data also showed that the indicator of economic sentiment in the eurozone rose to 18.0 points from 17.0 points in December. Economists had forecast a decline to 16.9 points. The indicator of the current economic situation rose by 1.2 points to -53.8 points, and inflation expectations rose to -14.8 points from -23.9 points in December.