Data published by the Leibniz Centre for European Economic Research (ZEW) showed that the indicator of German economic sentiment declined sharply in April after reaching its highest level since February 2022 in March. However, the assessments of the current economic situation have slightly improved.
According to the report, the indicator of economic sentiment fell to -14.0 points (the lowest since July 2023) compared to 51.6 points in March. The index has moved into negative territory for the first time in 18 months. Economists had expected the index to fall to 9.5 points. Meanwhile, the index of the current economic situation rose by 6.4 points to -81.2 points. Consensus estimates suggested an increase to -86.8 points.
“Chaotic changes in US trade policy have a serious impact on expectations in Germany, which have dropped sharply. Global uncertainty has increased significantly, not only because of the effects that the announced reciprocal tariffs may have on global trade, but also because of the dynamics of their changes. Economic expectations for Germany and the eurozone reflect this development. In particular, this applies to export-intensive sectors such as the automotive and chemical industries, as well as metallurgy and the machine-building complex, the prospects of which have improved recently. Financial market experts currently do not see the risk of a new spike in inflation in Germany and the eurozone. According to their estimates, this gives the ECB the opportunity to stimulate the economy by further lowering interest rates. However, opinions are divided on whether the Fed will ease monetary policy,” said ZEW President Professor Achim Wambach.
The data also showed that the indicator of economic sentiment in the eurozone fell to -18.5 points (lowest since December 2022) from 39.8 points in March. Economists had forecast a decline to 14.2 points. The indicator of the current economic situation fell by 5.7 points to -50.9 points, and inflation expectations fell by 9.1 points to -3.1 points.