German ZEW expectations retreat despite improving current conditions
German financial-market experts became less optimistic about the coming months in October, ending the summer improvement in ZEW’s expectations indicator. Their assessment of current conditions nevertheless improved sharply. The institute pointed to high energy prices pressing on household incomes and business costs, while expectations across banking, services and manufacturing moved in different directions.
Economics & Markets··Evening
Expectations fall as the current assessment rises
German economic expectations weakened in October after improving over the summer. ZEW’s expectations indicator fell 6.6 points to 28.1, from 34.7 in September. The Mannheim-based Leibniz Centre for European Economic Research surveys financial-market experts; its indicator captures their economic outlook rather than measuring current production.[1], [2]
The assessment of current conditions moved in the opposite direction. Its German indicator improved by 11.2 points to minus 35.9, compared with minus 47.1 a month earlier. The negative level persisted despite the substantial monthly improvement.[1], [2]
Energy prices weigh on consumption and investment
ZEW president Achim Wambach described Germany as slowly emerging from stagnation, while saying the recovery was not self-sustaining. He attributed weak private consumption and investment to high energy prices. In his assessment, energy presses on real incomes, raises production costs and keeps inflation elevated for longer.[1]
At the start of the fourth quarter, expectations for private consumption deteriorated. Industry assessments were mixed rather than uniformly weaker. The institute identified positive signals in steel and metal manufacturing and in electronics, alongside declining sentiment in several service activities. These are the survey respondents’ assessments of sector prospects.[1]
Banks weaken, euro-area expectations also decline
Banking expectations dropped 18.4 points and insurance expectations 9.0 points in October. Both had recently recorded strong increases. Their indicators nevertheless remained positive, at 34.5 and 37.4 respectively. Service-sector expectations decreased 6.8 points from September, while telecommunications fell 8.2 points.[1]
The euro-area expectations indicator fell again, declining 7.3 points to 18.5. The current-conditions assessment for the currency bloc changed much less: it slipped 0.9 points to minus 14.8.[1]
