German ZEW Aug. Economic Sentiment Preview: Expect -62.0
Economic sentiment in Europe’s largest economy as measured by the ZEW economics institute is expected to rise slightly to -62.0 in August from the all-time low -63.9 reading last month. The current conditions indicator is seen falling to 10 this month compared to the 2yr low of 17 in July.
Even though sentiment is seen improving a bit, it is little consolation since analysts and economists polled by the ZEW have never been so pessimistic. They had their reasons last month: The ECB raised its headline interest rate by 25bps to 4.25%, and Berling reported industrial orders had fallen for the sixth straight month.
Not much has changed — the rate’s the same, and industrial orders plunged 2.9% m-o-m in June to record their seventh straight decline. For a country that lives from manufacturing, the news could not have been much worse, and the situtation is not expected to improve soon. The German Economics Ministry said June showed a continuation of the decline in orders over the past few months, and both foreign and domestic demand point downward.
Recent euro weakness should help exporters, and easing oil prices are lowering production costs, but these shifts may not be enough to significantly improve the outlook for the German economy considering declining orders. A number of observers have cut their German growth expectations over the past few weeks, with Deutsche Bank seeing 2009 as nearly flat. However, German Q2 GDP growth fell to only -0.5% q-o-q, which beat expectations. Need to Know News’ Scream Audio will broadcast the survey results live at 11 a.m GMT Tuesday.