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Germany Sentiment Lowers

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Germany Sentiment Lowers

The Center for European Economics has just published this months key ZEW indicator for both Germany and the Eurozone as a whole.

The European ZEW Economic Sentiment figure came in at 61.2, this is slightly down on last months reading of 61.5 but is well ahead of the consensus estimate of 60.7. The German figure however posted a substantial miss at 43.2, this is not only down on last months 46.6 but also came in lower than the anticipated 45.0. The more concerning aspect of the German number is that it is not only in contractionary territory but it is also falling at a concerning pace.

The ZEW Economic Sentiment measures confidence around the future, there is an accompanying indicator, the ZEW Current Situation that takes confidence readings around the present state of economic confidence. Germany’s ZEW Current Situation indicator has posted a sharply positive reading this morning of 59.5, this easily beats the March print of 51.3 and is also well ahead of consensus estimates of 51.8.

The overall narrative here appears to be that firstly German businesses consider their economy to be strong and performing but that there appears to be growing concern about the future direction. The second element to consider is that whereas Germans are downbeat on the future economic conditions, the other Eurozone economies are expecting a pick up. Standing back from this it can be read that there is economic convergence expected among the 18 Eurozone economies, further this is not anticipated to be solely the slower countries catching up to Germany but also that the German economy is ultimately expected to revert back to the Eurozone average.

Convergence within the single currency zone is to be broadly welcomed, if nothing else the fact that all the constituent parts move at the same speed will result in an easier to manage economic bloc, this however will not please economies that perceive that they are being held back by their less economically sound neighbours.

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