German Economic Confidence Strongest Since 2015

German economic confidence strengthened in May as the country began to partially withdraw the lockdown imposed to slow the spread of the coronavirus, or Covid-19, survey data from the ZEW – Leibniz Centre for European Economic Research showed Tuesday.

The ZEW Indicator of Economic Sentiment rose 22.8 points to 51.0 in May. This was the strongest since April 2015 and above economists’ forecast of 32.0.

However, the assessment of current economic situation continued its downward trend. The corresponding index fell to -93.5 from -91.5 a month ago. The expected score was -88.0.

Coming from a very low point, it is no surprise that the future looks more optimistic. It is simply in the technical nature of the index, which is a relative assessment of future developments vis-à-vis the current situation, Carsten Brzeski, an ING economist, said.

“Optimism is growing that there will be an economic turnaround from summer onwards,” ZEW President Achim Wambach, said.

Financial market experts expect economic growth to pick up pace again in the fourth quarter of 2020. However, the catching-up process will take a long time, Wambach added. Only in 2022 will economic output return to the level of 2019.

The financial market experts’ sentiment concerning the Eurozone economic development also improved in May. The economic confidence index climbed 20.8 points to 46.0 in May.

By contrast, the indicator for the current economic situation fell by 1.1 points to minus 95.0 points.

Financial market experts expect inflation to ease further over the next six months. The inflation indicator came in at minus 18.7 points in May.

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Eurozone Economic Confidence Falls At Record Pace Amid Covid-19

Eurozone economic confidence deteriorated at the fastest pace on record in April amid the coronavirus, or Covid-19, pandemic, survey results from the European Commission showed Wednesday.

The economic confidence index fell to 67.0 in April from 94.2 in March. This was the strongest monthly decline since 1985, and the reading reached near the lowest levels seen during the Great Recession in March 2009.

Among sectors, the crash was particularly marked in services and retail trade.

The industrial sentiment index plunged to -30.4 from -11.2 a month ago. The steepest monthly fall on record resulted first and foremost from managers’ crashing production expectations, the survey showed.

The services confidence index slid to a record -35.0 from -2.3 largely due to record-breaking deterioration in expected demand and in the assessment of the past business situation and past demand.

Likewise, the retail trade confidence fell sharply to -28.3 from -8.6 as there was exceptionally strong deterioration in retailers’ business expectations.

The consumer sentiment indicator came in at -22.7, in line with the flash estimate, versus -11.6 in the previous month. The stark decline was fueled by households’ tumbling expectations concerning the general economic situation and also their own financial situation.

The construction sentiment indicator declined to -12.8 from +2.3 a month ago. The slump reflected managers’ marked corrections to their employment expectations and assessments of the level of order books.

At -1.81, the business climate index hit the lowest level since December 2009.

The employment expectations indicator plummeted 30.1 points to 63.7 in April, the lowest level on record.

Bert Colijn, an ING economist, said the biggest concern indicated by the survey is the rapid decline in employment expectations for both industry and services.

Prospects for the coming months are dismal despite announcements of cautious lockdown loosening, the economist added.

Elsewhere, data from the European Central Bank suggested that monetary conditions have loosened significantly. The monetary aggregate M3 expanded at a pace of 7.5 percent annually in March, following a 5.5 percent rise in February.

Annual growth in credit to private sector improved to 4.2 percent from 3.4 percent a month ago.

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