German Economic Confidence Highest In Over 2 Years

Germany’s economic sentiment strengthened more than expected to its highest level in just over two years in March amid increasing investor expectations that the European Central Bank will cut interest rates in the coming months, survey data from the think tank ZEW revealed Tuesday.

The ZEW indicator of economic sentiment rose markedly to 31.7 in March from 19.9 in February. The score also remained well above economists’ forecast of 20.5.

This was the highest score since February 2022, when the reading was 54.3.

In contrast, the assessment of the economic situation in Germany was barely unchanged and remained negative in March.

The current conditions index rose only 1.2 points from February to -80.5. The score was forecast to fall further to -82.

“Economic expectations for Germany are significantly improving,” ZEW President Achim Wambach said.

“At the same time, more than 80 percent of those surveyed anticipate that the ECB will cut interest rates in the next six months.”

This was the reason for the more optimistic outlook for the German construction industry, Wambach said.

The German export sector benefits from the increased economic expectations for China as well as the expected depreciation of the dollar against the euro, Wambach added.

However, the very low level of assessment of the current economic situation somewhat diminishes the increased economic expectations.

Investor confidence in the euro area also strengthened considerably in March.

The economic confidence index gained 8.5 points to 33.5. Meanwhile, the current situation index dropped 1.4 points to -53.4.