German Business Optimism Improvement Hints at Better Months to Come for Europe's Largest Economy
Image © Christian Müller, Adobe Stock
- Survey of financial professionals recovers in August but remains low
- External trade concerns main negative factor
- US-Euro detente helped recovery in sentiment
Optimism amongst German financial professionals picked up in August according to a leading confidence survey, although it still remained at relatively low levels historically.
The Zentrum fur Europaische Wirtschaftsforschung (ZEW) economic sentiment survey for August, composed of responses from 350 German institutional investors and analysts, showed a recovery in August, but still remained in negative territory overall.
The sentiment gauge is considered a fairly reliable indicator of future economic trends.
Results from the survey showed that ZEW economic sentiment in Germany recorded an increase of 11.0 points in August in the 'expectations' category but still stood at -13.7 points.
Economic expectations in the Eurozone as a whole also experienced a recovery, rising by 7.6 points from the previous month's reading of -18.7 to a new reading of -11.1 in August.
A minus figure shows on balance the majority of responses were pessimistic with more answers negative rather than positive.
External factors were a major contributing factor to the low score, although concerns seemed to have eased from the previous month.
An improvement in trade relations between the US and the Euro-area was a major driver for the improvement.
"The recent agreement in the trade dispute between the EU and the United States has led to a considerable rise in expectations for Germany and also, to a lesser degree, for the Eurozone. However, the economic outlook for Germany is now significantly less favourable than it was six months ago,” comments ZEW president professor Achim Wambach.
The survey also asks financial professionals for their views on where major currencies are heading and in August the consensus was overwhelmingly that Dollar would rise (+30.9) and the Pound would fall (-40.2).
The balance of responses for the japanese Yen and the Swiss France suggested mild gains for these of (4.0 and 5.0).
The Euro saw a marginal recovery after the release, rising from lows of 1.1380 to 1.1400 versus USD and came off marginally versus GBP, falling from circa 1.1215 to 1.1211.
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