Germany’s Economic Outlook Plummets: ZEW Indicator Dropped Significantly, Forecasts Cut Amid Growing Uncertainty

The ZEW indicator tries to gauge the mood of the German economy by interviewing 300 experts from banks, insurance companies and financial sectors every month. Participants are asked about their expectations for the next six months in relation to inflation, interest rates, dividends and money.

On Tuesday, the August poll came in at 19.2 points, which is a significant drop from the July poll of 41.8 points. The drop is three times larger than expected, according to Bloomberg, and the biggest drop since April 2020.

The ZEW indicator, which does not measure future expectations but the current situation, fell by 8.4 points to -77.3 points, and the ten-year average is 5 points.

Bloomberg strategists cut their growth forecast for the third quarter to 0.1 percent from 0.3 percent, and revised it to 0.3 percent for the year. GDP growth in Germany also ended at a negative 0.1 percent for the second quarter.

– The economy is falling apart

“The economic outlook for Germany is deteriorating. In the current study, we see the biggest drop in economic expectations in the last two years,” wrote the President of ZEW, Professor Achim Wambach.

“A lot of uncertainty is likely to continue to affect economic prospects, driven by uncertain monetary policy, disappointing data from the US economy and growing concerns about an increase in the conflict in the Middle East. Recently, this uncertainty has manifested itself in turmoil in international stock markets,” Wambach wrote.