The German ZEW institute, a center for European economic research, announced today a significant drop in the investment confidence index by 65.6 points in April to -14 points, marking the steepest decline in expectations since Russia’s invasion of Ukraine in 2022.
However, there has been a slight improvement in the assessment of Germany’s current economic situation, with a rise of 6.4 points, resulting in a figure of -81.2 points.
“Erratic changes in U.S. trade policy heavily weigh on Germany’s expectations, which have sharply declined,” stated ZEW President Achim Wambach.
“It is not only the consequences of the announced reciprocal tariffs that may affect global trade but also the dynamics of their changes, which have significantly increased global uncertainty,” Wambach added.
This uncertainty is evident in the economic expectations for Germany and the eurozone.
The export-oriented sectors, including the auto and chemical industries, as well as metallurgy, steel production, and mechanical engineering, which had recently seen improved prospects, are impacted.
Financial market experts do not currently anticipate an increase in inflation in Germany and the eurozone, which provides the European Central Bank (ECB) with the flexibility to further lower key interest rates to stimulate economic growth, according to ZEW.
Markets and analysts are anticipating that the ECB will cut the interest rate on bank deposits, presently at 2.5%, on Thursday.
The deposit facility rate, which is the interest rate banks receive when depositing money overnight with the ECB, has been a key indicator of the central bank’s monetary policy for some time.
However, ZEW’s surveyed financial experts are divided regarding the necessity for the Federal Reserve to ease monetary policy.
Expectations for the eurozone economy similarly plummeted in April, with the indicator dropping 58.3 points to -18.5 points.
The assessment of the current economic situation in the eurozone also worsened, albeit to a lesser extent.
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