German investor sentiment unexpectedly improves in September - ZEW

Investor sentiment in Germany unexpectedly improved in September, according to a survey released on Tuesday.

The ZEW investor expectations index rose to -11.4 from -12.3 in August, coming in comfortably above consensus expectations of -15.0.

However, the current conditions index fell to -79.4 in September from -71.3 the month before. This was below expectations of -75.0 and marked a three-year low.

ZEW president Achim Wambach said: "The financial market experts assess the current economic situation in Germany even more pessimistically than in August 2023. This development puts into perspective the slightly increased expectations regarding the economic situation over the next six months.

"The more positive economic expectations for Germany are accompanied by a significantly more optimistic outlook regarding developments on the international stock markets. This is at least partly due to the fact that the proportion of respondents who expect stable interest rates in the euro area and the USA has continued to rise.

"In addition, the experts expect a further easing of interest rate policy in China."

Melanie Debono, senior Europe economist at Pantheon Macroeconomics, said: "A widening gap between rising expectations and a falling current conditions index normally is a good sign in this survey, as it implies we are near a trough when private sector activity is falling. Our GDP profile is in line with this message; we look for German GDP to fall in Q3 before rebounding in Q4. The rebound we have pencilled in is tepid, in line with the still-low ZEW expectations index; the ZEW expectations index was around the 30-mark in February and near 60 before the start of Russia’s invasion of Ukraine in February last year.

"And we warn that risks are probably tilted towards renewed weakness in expectations, as equities and other risk assets come under pressure over the next few months. We look for the eurostoxx50 index to slide to below 4,000 by year-end."