ZEW index falls unexpectedly
Stock market professionals: situation good – prospects cloudy
04/18/2023 12:07 p.m
According to market participants, Germany will probably avoid a recession. However, they do not expect significant growth impulses in the next six months. High inflation rates and high interest rates do not allow any tailwind. On the other hand, they rate the current situation better than recently.
The view of the stock market professionals on the German economy is again more pessimistic. According to the Mannheim Center for European Economic Research (ZEW), the indicator collected for this purpose signals that no significant improvement in the economic situation is to be expected in the coming months. The index for assessing the economy over the next six months fell by 8.9 points in April to a new low for the year of 4.1 points. Economists had expected an increase to 15.3 points. In March, a series of five increases in a row ended abruptly because the turbulence surrounding Credit Suisse and the bankruptcy of Silicon Valley Bank fueled concerns about a financial crisis 2.0.
The assessment of the economic situation, on the other hand, improved surprisingly significantly in the current month: This value rose by 14.0 points in April, but remains clearly in negative territory at minus 32.5 points.
According to the ZEW, the prospects are negatively influenced by several factors. “On the one hand, the experts expect banks to be more cautious in their lending practices,” said ZEW President Achim Wambach. “On the other hand, the still high inflation rates and the internationally restrictive monetary policy are a burden.” It is positive that the danger of an acute crisis on the international financial markets is no longer seen. “The earnings prospects for banks and insurance companies have improved compared to the previous month and are clearly positive again,” said Wambach.
Consumption is paralyzed, construction is ailing
A recession scenario is not yet off the table for VP Bank. The industry benefits from functioning supply chains and the opening of the Chinese economy. And in Germany, incoming orders, exports and industrial production have recently recorded robust growth rates. But the positive news could prove to be a flash in the pan, as private consumption and the construction industry remain ailing. The production catch-up effects have subsided and the interest rate hikes by the European Central Bank have yet to unfold, the bank judged.
“Spring is coming, confidence is going,” says Alexander Krüger from Bankhaus Hauck Aufhäuser Lampe, summarizing the results. “But the better assessment of the situation supports the view that the economy will get away with a black eye.” In view of the high inflation and restrictive monetary policy, economic momentum is still out of the question. “A mini-growth remains the highest of emotions for 2023.”
The leading institutes are no longer expecting a recession in Germany due to the gradual easing of inflation. The gross domestic product is likely to grow by 0.3 percent this year, according to the joint forecast for the federal government. In autumn, under the impact of the energy crisis, a minus of 0.4 percent was estimated and a recession was expected in the winter half-year that had just ended. The International Monetary Fund, on the other hand, expects Germany’s economic output to decline by 0.1 percent. For 2024 there should then be another plus of 1.1 percent.