Investor confidence in Germany’s economy plummets

The European Center for Economic Research (ZEW), based in Mannheim, Germany, announced the May results of the ZEW Economic Confidence Index, which measures the expectations of institutional investors and analysts for the next 6 months.

Consequently, the index decreased 14.8 points in May compared to the previous month.

Thus, the index, which was at 4.1 points in April, fell to minus 10.7 points this month. The market expectation was for the index to drop to minus 5.3 points in April.

Thus, the index fell below zero for the first time since December 2022.

‘It will get worse for 6 months’

The index fell sharply in March, despite rising expectations, ending its five-month rise in April amid inflation and monetary policy uncertainty, after turmoil over Credit Suisse and bankruptcy. of Silicon Valley Bank accelerated concerns about a new global financial crisis.

The Current Situation Index in Germany, on the other hand, decreased 2.3 points compared to the previous month and fell to minus 34.8 points.

ZEW Chairman Prof. Dr. In his assessment on the subject, Achim Wambach stated that financial market experts predict that the already negative economic situation will worsen in the next 6 months and said: “As a result, the German economy may enter a recession , although slightly. The drop in the Economic Confidence Index is due to the expectation of further rate hikes by the ECB. In addition, the possible US default in the coming weeks adds uncertainty to the global economic outlook.

THE ECONOMY MADE A BIT OF RECESSION IN THE FIRST QUARTER

Industrial production in Germany fell 3.4 percent in March, more than expected due to a sharp drop in auto manufacturing, accelerating recession concerns in Europe’s largest economy.

According to main data from the German Federal Statistical Office (Destatis), the German economy did not grow in the first quarter of this year due to unusually high inflation and rising interest rates that suppressed consumer spending.

Thus, after zero growth in the first quarter, the German economy did not enter “closely” into technical recession, which is expressed as “two quarters of GDP contraction”.

The German economy contracted 0.5 percent in the last quarter of last year.

Although the bottlenecks that arose during the Covid-19 epidemic have eased, the German economy is negatively affected by stagnant demand as a result of rising interest rates, declining confidence in the economy and the decrease in consumer purchasing power. in an environment of unusually high inflation.

The German government expects 0.4 percent growth in the economy this year. Leading German economic institutes predict the country’s economy will grow 0.3 percent this year.

Destatis will release its final first quarter GDP data on May 25.

THE ASSESSMENT OF ECONOMIC DEVELOPMENT IN EUROPE HAS BEEN NEGATIVE

On the other hand, the assessments of financial market experts on the economic development of the Eurozone deteriorated significantly in May.

The indicator in question decreased 15.8 points in May compared to April and fell to minus 9.4 points. (AA)