The European Centre for Economic Research (ZEW) reported on Tuesday that German economic expectations for May 2026 have shown signs of improvement. The expectations index stands at -10.2 points, marking a 7.0-point increase from the previous month. However, the assessment of the current economic situation actually declined, with Germany’s situation indicator dropping 4.1 points to -77.8 points compared to the prior month.
ZEW President Achim Wambach commented on the conflicting data, noting that while expectations are becoming brighter, they remain in the negative territory. He explained that the experts had been hoping for a quick end to the Middle Eastern conflict. Nevertheless, he cautioned that weak industrial production, increasing energy costs, and inflation remaining above the 2% mark continue to challenge the German economy. Looking ahead, a cautious chance for recovery is visible in the second half of 2026, provided that the Near East conflict subsides and state stimulus packages prove effective.
Analyzing individual industrial sectors provided a mixed picture. The balance for the automotive industry deteriorated substantially, falling by 13.0 points to -57.2 points. The mechanical engineering sector also saw a decrease in May, with its index dropping 9.2 points to -32.1 points. Furthermore, the balance for private demand continued its negative trend, falling 8.2 points to -41.6 points.
Conversely, the ZEW noted several areas experiencing improvement. Prospects for information technologies strengthened markedly, rising by 12.1 points to a balance of 56.6 points. Additionally, both the metal production and construction sectors reported increases.
Looking beyond German borders, expectations for the Eurozone climbed strongly in May. The index improved by 11.3 points, reaching a balance of -9.1 points (up from the previous month’s reading of -41.4 points). The assessment of the overall situation improved marginally, increasing by 1.6 points to -41.4 points.
