Euro Macro: German sentiment improves, but remains subdued - ABN

Aline Schuiling, senior economist at ABN Amro explained that Germany’s ZEW economic sentiment (gauging the expectations of economists and analysts about the state of the German economy over the next six months increased to -10.6 in August, from -13.7 in July. 

Key Quotes:

"This was the second consecutive monthly rise, which followed six monthly drops in a row and has left sentiment still well below its long-term average of almost +23. The details of the report show that expectations about the eurozone economy as a whole improved somewhat, whereas the outlook for Italy became gloomier.

Obviously, worries about the possible consequences of the expansionary budgetary policy plans of Italy’s new government have played a role here.

These plans had already reduced investor sentiment towards Italy in the past few months, pushing Italy’s government bond yields higher and equity prices lower. Besides Italy, expectations for the US economy dropped as well, which probably reflects worries about the intensifying trade conflict between the US and China.

All in all, the rise in ZEW sentiment towards Germany and the eurozone in August and September is consistent with our base scenario for the economy of Germany and that of the eurozone as a whole – which is of a slight pick-up in growth in the second half of the year, following the slowdown in the first half."