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Aug 10, 2021

ZEW survey shows slide in German economic sentiment for third month

Risks to the economy are increasing, says ZEW president Achim Wambach

Economic sentiment in Germany has continued to slide amid concerns about a new wave of Covid-19 and global growth prospects, according to a closely watched survey.

The ZEW Indicator of Economic Sentiment, which polls around 350 financial market experts, has fallen for a third consecutive month to hit 40.4 points, a drop from 63.3 points in July. The research was conducted between August 2 and August 9.

The indicator asks respondents – analysts who work at banks, insurance companies and major industrial companies – to give their view on Germany’s economic prospects over the next six months. The result indicates the net percentage of respondents who have a bullish outlook.

‘Expectations have declined for the third time in a row. This points to increasing risks for the German economy, such as from a possible fourth Covid-19 wave starting in fall or a slowdown in growth in China,’ says Achim Wambach, president of the ZEW – Leibniz Centre for European Economic Research, in a statement.

The survey also measures how respondents feel about the current economic situation in Germany. In this case, sentiment has improved by 7.4 points since July to 29.3 points.

‘The clear improvement in the assessment of the economic situation, which has been ongoing for months, shows that expectations are also weakening due to the higher growth already achieved,’ says Wambach.

Despite slipping economic confidence, the German stock market continues to trade close to record levels. Following the release of the survey today, the DAX 30 was trading up around 0.2 percent at 15,777 points. The blue-chip index hit a record high of 15,790 on July 12.

In Germany, the number of daily Covid-19 cases has been rising since June and politicians are worried about a fourth wave hitting the country in the fall. The country’s health ministry is considering banning unvaccinated people from areas of public life, like shops and restaurants, to boost uptake, according to media reports last week.