Germany’s economic outlook, while exhibiting a degree of resilience, faces headwinds as concerns mount over governmental policy effectiveness, according to the latest ZEW economic sentiment indicator released Tuesday. The November 2024 survey revealed a slight decline in expectations, registering at 38.5 points – a decrease of 0.8 points from the previous month.
ZEW President Achim Wambach acknowledged the stability of the overall indicator, but underscored a worrying trend: a significant erosion of confidence in the government’s ability to guide the economy. While the planned investment program is predicted to provide a short-term stimulus, it’s largely seen as insufficient to address underlying structural challenges. This sentiment suggests a growing disconnect between government ambition and market perception.
Interestingly, the assessment of the current economic situation has marginally improved, with the corresponding indicator rising by 1.3 points to -78.7. However, this improvement is not evenly distributed. The outlook for key sectors like the chemical and metal industries continues to deteriorate, alongside a weakening in the banking and insurance industries. This divergence highlights the uneven recovery, potentially exacerbating existing inequalities.
In stark contrast, private consumption shows a notable increase, registering a 13.3-point gain. The electrical, service, telecommunications and IT sectors also reported positive, albeit smaller, improvements. This divergence could reflect consumer resilience despite broader economic uncertainty, or represent pockets of strength in rapidly adapting industries.
The Eurozone remains comparatively stable, with expectations rising slightly to 25.0 points and an improving assessment of the current environment at -27.3 points. This relative strength within the broader Eurozone underscores the importance of observing Germany’s performance, considering its pivotal role within the currency bloc. The persistent anxieties surrounding Berlin’s structural reforms and policy execution pose risks not only domestically but also across the Eurozone itself. The stability in other areas may not necessarily shield the bloc from the repercussions of a prolonged German underperformance.
