German Economic Sentiment Sharply Lower

Economic sentiment in Germany fell in October to its lowest level since July as increasing cases of Covid-19 in Europe, along with Brexit uncertainty, have raised concerns about the economy.

The ZEW Indicator of Economic Sentiment Tuesday fell 21.3 points in October to 56.1, and while economists were expecting a decline, the result was far worse than expected. The median forecast of an Econoday survey was for a decline to 74.0 from the 77.4 result in September.

Although sentiment is still positive overall, “the great euphoria witnessed in August and September seems to have evaporated. The recent sharp rise in the number of Covid-19 cases has increased uncertainty about future economic development, as has the prospect of the UK leaving the EU without a trade deal,” said ZEW president, professor Achim Wambach.

Further adding to the uncertainty is coming ahead of the presidential election in the United States, Wambach said.

Even with expectations sharply lower, the view of the current situation improved for Germany with the current conditions index increasing 6.7 points to -59.5. Economists in the Econoday survey had also expected current conditions to deteriorate as well, with the median forecast calling for a decline to 66.2.

The results for the countries sharing the euro reflected those for Germany with economic sentiment falling while current conditions improved. Eurozone economic sentiment fell to 52.3 in October, down 21.6 points, while current conditions were up 4.3 points to -76.6, according to ZEW.

Germany’s Ifo Institute will release its closely watched Business Climate Index on October 26 at 10:00 Central European Time.

Marco Babic

Julie Ros
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Julie Ros

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