German Investor Confidence Improves For Third Month

A measure of German investor confidence improved for a third straight month and at a faster-than-expected rate in June, as the lockdown restrictions that were imposed to slow the spread of the coronavirus pandemic were eased, survey data from the think tank ZEW showed on Tuesday.

The ZEW economic sentiment indicator rose to 63.4 from 51 in May. Economists had forecast a score of 60.

The index has improved steadily after plummeting to -49.5 in March as the Covid-19 pandemic began spreading in Europe.

The further improvement in expectations probably reflects the lifting of lockdown measures as well as central bank and government actions, ING economist Carsten Brzeski said.

The economist, however, cautioned that any initial sharp rebound will be followed by a flattening out as the structural challenges the German economy was already facing prior to Covid-19 have not suddenly disappeared.

The latest fiscal stimulus package will tackle some of these weaknesses, but it will take some time, Brzeski added.

The current conditions index of the survey climbed to -83.1 from -93.5 in May. Economists had expected a reading of -84. The latest improvement in the index was the first since January.

“There is growing confidence that the economy will bottom out by summer 2020,” ZEW President Achim Wambach said.

“The financial market experts continue to expect only a slow increase in economic value added in the third and fourth quarters,” Wambach added.

The ZEW president also pointed out that expected earnings for the individual sectors in Germany still vary greatly.

Earnings expectations are strongly negative for export-oriented sectors such as automotive and mechanical engineering, as well as the financial sector, while forecasts are fairly positive for information technologies, telecommunications and consumer-oriented services, he said.

The economist sentiment index for Eurozone gained 12.6 points to reach 58.6. The current conditions index added 5.4 points to reach minus 89.6 points.

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