"Outlook brightens, recovery proves difficult"
Financial experts look at the German economy more optimistically, but their confidence is growing slower than before. An economist speaks of a brake on economic hopes. This could be mainly due to persistent inflation and the tussle with China.
Financial experts look only slightly more optimistic about the German economy than they do about the global economy. The expectation barometer for the next six months rose surprisingly only minimally by 0.4 points to 47.5 points in June - but this is still the eleventh consecutive increase. The Mannheim Center for European Economic Research (ZEW) announced this in its survey of 154 analysts and investors. Economists had expected a stronger improvement for June. "This result is a clear brake on existing economic hopes," said Chief Economist Alexander Krüger of Hauck Aufhäuser Lampe Private Bank. "The time for growth optimism is not yet ripe."
The ZEW Barometer reached the highest level since February 2022, only to be lowered by the unexpectedly poor assessment of the economic situation. This indicator fell by 1.5 points and slipped deeper into the negative range with minus 73.8 points. "Economic expectations and the assessment of the current situation for Germany are stagnating," said ZEW CEO Achim Wambach. "The prospects for the German economy are brightening up, but the recovery is proving to be difficult," assessed Helaba analyst Ulrich Wortberg.
The German economy grew by 0.2 percent at the beginning of 2024 and thus just barely avoided a recession. Many experts also expect an increase in the gross domestic product for the current quarter. Above all, consumers are expected to drive the economy with higher spending. "Private consumption could pick up steam in the coming quarters," explained Chief Economist Thomas Gitzel of VP Bank. Because inflation is losing its bite and is causing higher real incomes and more purchasing power. The ZEW Index recovered only slightly in June, but significantly in the previous months. "The message is: An upturn is on the horizon," emphasized Gitzel.
However, the development does not offer much dynamism. "It's really about getting back to sustainable growth above the zero percent mark," said Gitzel. "Growth rates above one percent are not yet visible." The federal government expects 0.3 percent growth for 2024, which could accelerate to up to one and a half percent next year.
The recently slightly higher inflation rates in Germany and the Eurozone may have dampened the hope for continued interest rate cuts by the European Central Bank, explained Christoph Swonke, conjunctural analyst of DZ Bank. This worried the stock market professionals. "Furthermore, the EU Commission is showing China the yellow card." It wants to impose tariffs on Chinese electric cars due to subsidies. "Should China take countermeasures, this would be sand in the already slowly starting economic engine."
- Despite the slight improvement in the ZEW Index, the economic forecasts for the German economy remain cautious, with economist Alexander Krüger stating that the time for growth optimism is not yet ripe.
- The unexpectedly weak assessment of the economic situation in the ZEW Barometer, along with the ongoing struggle with China and persistent inflation, raise concerns about the sustainability of the economic recovery and the potential impact on the interest rate policy.
