German investor morale gets brighter in June

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
A paper mill of the manufacturer Leipa in Germany as the ZEW Indicator of Economic Sentiment for Germany showed that expectations among investors rose in June. (Christophe Gateau/picture alliance via Getty Images)

German investor morale rose for the third month in a row in June, on hopes that the worst of the economic damage caused by the coronavirus is nearly over.

The ZEW Indicator of Economic Sentiment for Germany showed that expectations among investors rose to a higher-than-expected 63.4 this month, a 12.4-point improvement from May.  

“There is growing confidence that the economy will bottom out by summer 2020,” said ZEW president Achim Wambach in a statement. “This is reflected in the renewed rise of the ZEW Indicator of Economic Sentiment as well as the more optimistic assessment of the current situation.”

The assessment of the current economic situation in Germany has improved for the first time since January 2020, the survey notes, surging 10.4 points from May to minus 83.1 points in June.  

READ MORE: Record slump in German car production could put 100,000 jobs at risk

The German government recently announced a €130bn (£116bn, $145bn ) financial stimulus package to help businesses reboot after lockdowns that paralysed the country for several months, although its export-driven economy depends on how the rest of the world economy emerges from the pandemic.

The German economy is predicted to shrink by 6.6% this year.

“We would agree that the worst could be over,” ING chief eurozone economist Carsten Brzeski said, noting that “after a sharp rebound, some flattening out should follow.”

“More real-time data, such as Google mobility data, shows that activity already accelerated by mid-May,” Brzeski said in a note. “While (social and economic) activity slowed down to 60% of its January level during the peak of the lockdown, it has now returned to almost 90%.”

ZEW president Wambach notes that expected earnings for the individual sectors in Germany still varies greatly, from very negative for export-dependent sectors like automotive and engineering, to quite positive for IT, telecoms and consumer-services industries.

READ MORE: German government takes €300m stake in vaccine developer CureVac

On the broader eurozone picture, investor sentiment looking ahead has also improved in June, with the index climbing 12.6 points from May to 58.6 points. Their assessment of the current economic situation in the eurozone also brightened slightly.

Eurozone ministers meet this Friday (19 June) to discuss the bloc’s next budget.