Aline Schuiling, Senior Economist at ABN AMRO, explains that the Germany’s ZEW economic sentiment dropped in October, wiping away all the gains that were made during the two previous months.
Key Quotes
“The index, which measures the expectations of economists and analysts about economic conditions in Germany during the next six months declined from -10.6 to -24.7, which is the same level as in July and significantly lower than the long-term average value.”
“The details of the ZEW report suggest that the drop was driven by fears for slower growth in Germany’s major exports markets France, Italy, the UK and the US.”
“Germany’s Ifo business climate indicator improved in August and September, but the ZEW indicator signals that there could be a pull back again in business confidence in October. This raises the risk that the export-led soft patch in the German economy will continue.”
“Meanwhile, the details of the ZEW report show that expectations about short- and long-term interest rates in the US and Germany jumped higher in October.”
“So some of the weakness in the ZEW might be based on too gloomy assumptions about the speed of monetary policy normalisation.”
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