ZEW economic sentiment index for Germany drops for a third time in August
By Alexander Bueso
Date: Tuesday 10 Aug 2021
(Sharecast News) - Analysts were less upbeat on the outlook for the German economy due to the risk of a new wave of Covid-19 in autumn or a slowdown in China, the results of a closely-followed survey revealed.
The ZEW institute's economic sentiment index fell for a third straight month in August to reach 40.4 (consensus: 56.0), down from a reading of 63.3 in July.
However, another gauge tied to how financial market experts view the current situation in Germany's economy improved by 7.4 points to 29.3.
"This points to increasing risks for the German economy, such as from a possible fourth COVID-19 wave starting in autumn or a slowdown in growth in China," ZEW president, professor Achim Wambach, commented.
"The clear improvement in the assessment of the economic situation, which has been ongoing for months, shows that expectations are also weakening due to the higher growth already achieved."
The expectations index for the euro area as a whole fell by 18.5 points to 42.7, while that tracking views on the current situation rose by 8.6 points to 14.6.
For his part, Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said a clear reversal was now evident in expectations, suggesting that momentum in the economy was peaking.
But regardless of whether the inflection was due to concerns that new vaccine-resistant Covid-19 variants might emerge "to be clear, growth had to slow at some point".
"Whatever the driver, the fall in expectations represents an important shift for markets having priced-in an accelerating recovery since the latter part of 2020.
"This is even more the case in light of looming removal of emergency stimulus by central banks as economies recover from their Covid-losses in output."
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