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Commenting on the disappointing ZEW Economic Sentiment data for Germany, “the indicator measuring the outlook for Germany’s economy during the next six months (‘improve’ minus ‘deteriorate’) fell to 8.7, down from 26.7 in January, and returned to levels well below the long-term average of 21,” said Aline Schuiling, senior economist at ABN AMRO.

Key quotes

“The details of the report show that the drop was driven by fears for the impact of the outbreak of the coronavirus on China’s economy and world trade. Sentiment about Germany’s export driven sectors Automobile, Chemicals/Pharmaceuticals and Electronics dropped the most.”

“Considering that Germany’s GDP stabilised in 2019Q4, the drop in ZEW sentiment suggests that GDP contracted in 2020Q1, which is in line with our base case for Germany. We have pencilled in -0.2% qoq for Q1, which is more negative than the eurozone aggregate, as exports to China have a considerably larger share in Germany’s GDP than in most other eurozone countries.”

“A separate report about growth in European car registrations underlined that Germany’s economy is clearly in trouble. Growth in new car registrations dropped to -7.5% yoy in January, down from +22.7% in December, when sales were temporarily lifted by tax measures.”