The ZEW Index reaches a level prior to the Ukraine conflict.
Economic analysts are growing more optimistic about the future of the global economy, with the ZEW index showing a marked rise for the tenth time in a row. This increase in confidence is being fuelled by improvements in the global market and signs that the economy is bouncing back.
The ZEW index, which measures expectations for the German economy, increased by 4.2 points to 47.1 in May. This is the highest it's been since February 2022, when the international situation appeared to be more stable. Economists had only predicted an improvement of 46.0 points.
Moreover, the economic situation was also assessed as being better, climbing 6.9 points to -72.3, but still remaining heavily in the negative. "Optimism is increasing," commented ZEW director Achim Wambach. "We're seeing more evidence of an economic rebound." He also pointed to improvements in the eurozone as a whole and in China, which could contribute to the recovery. "This optimism is particularly visible in the sharp rise in expectations for domestic consumption, construction, and machinery."
Slow Recovery Ahead
Despite the apparent improvements, growth in the German economy remained weak in the first quarter, with only 0.2% growth, narrowly avoiding a recession. The Federal Ministry of Economics predicts a gradual improvement as economic conditions stabilize.
Inflation is expected to decrease following the European Central Bank's (ECB) decisions to cut interest rates and boost inflation. This should also aid wage and income hikes which will, in turn, aid the economic recovery.
However, a sustainable recovery is not yet visible, according to the head of department, Robert Habeck. The main reasons for this are the lacklustre growth of private consumption and investment in equipment, along with the ongoing subdued industrial order situation. While the labor market remains stable, there are still high risks due to global uncertainties.
Economists are cautiously optimistic about the situation. DZ Bank's Christoph Swonke predicts a slow crawl out from the difficult economic conditions, with Europe's largest economy set to gain strength throughout the year. Hauck Aufhäuser Lampe Privatbank's chief economist, Alexander Krüger, agrees that a recovery is possible but, with a negative view of the current state of affairs, only 'mini-growth' is likely. This current climb out of recession seems unlikely to generate a full turnaround, especially when it comes to investment. "We need a much more positive outlook on the situation to secure higher growth forecasts," Krüger stated.
What already exists is not enough to spark further growth, particularly with regards to substantial investments. "A significant improvement in the situation assessment is needed for higher growth projections," Wambach concluded.
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The ZEW Index, which reflects expectations for the German economy, showed a significant rise in May, reaching a level last seen prior to the Ukraine conflict. This improvement in the economic situation is contributing to the growing optimism among economic analysts about the future of the global economy.
Source: www.ntv.de
