German economic sentiment improves in September

German economic sentiment improved in September, according to the latest survey from the ZEW Center for European Economic Research in Mannheim.

The economic sentiment indicator rose 3.1 points from August to -10.6, beating expectations for a drop to -14 and recovering from its low point in July. However, the indicator remained in negative territory and well below the long-term average of 22.9.

Meanwhile, the current situation index pushed up to 76.0 in September from 72.6 the month before, beating expectations for a reading of 72.0.

Achim Wambach, President of ZEW, said: "During the survey period, the currency crises in Turkey and Argentina intensified, while German industrial production and incoming orders were surprisingly low in July. Despite these unfavourable circumstances, economic expectations for Germany improved slightly. The considerable fears displayed by the survey participants regarding the economic development have diminished somewhat, which may in part be attributable to the new trade agreement between the USA and Mexico."

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said this was a surprisingly positive headline in light of Monday's decline in the Sentix expectations index, though sentiment remains low overall.

"The details show that inflation expectations, in Germany and in the eurozone as a whole, fell in September probably due to fading base effects in oil prices pointing to lower headline inflation in coming months. Short-term rate expectations were unchanged, but they fell marginally for long rates. Finally, expectations for equities improved across all the major EZ indices, indicating that investors are becoming slightly more upbeat on the market following an overall very depressed stance in recent months.

"With the Sentix up and the Zew down, the September investor sentiment data do not give a clear signal for the economic surveys. The Zew is usually a better indicator for the Ifo than the Sentix is, but the chart shows that a September dip in the Ifo shouldn’t be a big worry given the jump in August."