The European Economic Research Center (ZEW), headquartered in Mannheim, Germany, announced the May results of the ZEW Economic Confidence Index, which measures the expectations of institutional investors and analysts for the next 6 months.
Accordingly, the index decreased by 14.8 points in May compared to the previous month. Thus, the index, which was 4.1 points in April, dropped to minus 10.7 points this month. The market expectation was for the index to decline to minus 5.3 points in April.
Thus, the index fell below zero for the first time since December 2022.
The index fell sharply in March, despite the rising expectations, ending its five-month rise in April amid inflation and uncertainty over monetary policy, after the turmoil surrounding Credit Suisse and the bankruptcy of Silicon Valley Bank accelerated concerns over a new global financial crisis.
The Current Situation Index in Germany, on the other hand, decreased by 2.3 points compared to the previous month and fell to minus 34.8 points.
ZEW President Prof. Dr. In his assessment on the subject, Achim Wambach stated that financial market experts predict that the already negative economic situation will worsen in the next six months, adding, “As a result, the German economy may enter a recession, albeit mildly. The decline in the Economic Confidence Index is due to the expectation of further rate hikes by the ECB. In addition, the possible default by the United States in the coming weeks adds uncertainty to global economic prospects.
Economy narrowly escaped recession in first quarter
Industrial production in Germany fell by 3.4 percent in March, more than expected due to the sharp decline in automobile manufacturing, accelerating the recession concerns of Europe’s largest economy.
According to the leading data of the German Federal Statistical Office (Destatis), the German economy did not grow in the first quarter of this year due to the unusually high inflation and rising interest rates suppressing consumer spending. Thus, after zero growth in the first quarter, the German economy did not “closely” enter the technical recession, which is expressed as “a contraction in GDP for two consecutive quarters”.
The German economy shrank 0.5 percent in the last quarter of last year.
Although the bottlenecks that emerged during the COVID-19 epidemic eased, the German economy is adversely affected by the stagnation in demand as a result of the rise in interest rates, the decrease in confidence in the economy and the decrease in the purchasing power of consumers in an unusually high inflation environment.
The German government expects 0.4 percent growth in the economy this year. Leading German economic institutes predict the country’s economy to grow by 0.3 percent this year.
Destatis will release its final first quarter GDP data on May 25.
On the other hand, the assessments of financial market experts on the economic development of the Eurozone deteriorated significantly in May.
The indicator in question decreased by 15.8 points in May compared to April and fell to minus 9.4 points.