German investor sentiment improves in May - ZEW
By Michele Maatouk
Date: Tuesday 19 May 2020
(Sharecast News) - German investor sentiment picked up in May, according to the latest survey from the ZEW Center for European Economic Research in Mannheim.
The headline ZEW investor expectations index printed at 51.0 from 28.2 in April, coming in ahead of consensus expectations for a reading of 32.0.
However, the current situation index fell to -93.5 in May from -91.5 the month before, missing expectations for a reading of -88.0.
ZEW President Professor Achim Wambach said: "Optimism is growing that there will be an economic turnaround from summer onwards. This is also reflected in the significant improvement in expectations for the individual sectors.
"According to the financial market experts surveyed, economic growth is expected to pick up pace again in the fourth quarter of 2020. However, the catching-up process will take a long time. Only in 2022 will economic output return to the level of 2019."
ING economist Carsten Brzeski said improved expectations probably reflect the first lifting of lockdown measures, the stock market rally of the last few weeks, central bank and government action as well as a good portion of optimism that all previous viruses have eventually ended with a U- or V-shaped recovery.
"Given that traditionally, the ZEW index has a better track record in predicting turning points in the economy, rather than predicting exact outcomes for GDP growth, it is interesting to look at the difference between current assessment and expectations. This difference is currently larger than in 2008, suggesting investors' increasing optimism that the worst might be behind us.
"Indeed, the worst could be over. Even if backward-looking macro data continues to be dreadful for quite some time, more real-time data, such as Google mobility data, shows that activity already accelerated by mid-May. While (social and economic) activity slowed down to 60% of its January level during the peak of the lockdown, it has now returned to more than 80%.
"The lifting of the lockdown measures, as well as the huge fiscal support by the German government (more than 30% of GDP), support the view that the German economy could leave the crisis earlier and stronger than most other countries."
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