Brexit, coronavirus, and US election depress German investor morale

17 August 2020, Hamburg: Panoramic view over the river Elbe to the container gantry cranes of different terminals in the harbour of Hamburg. The Annual General Meeting of Hamburger Hafen und Logistik AG (HHLA) will take place on 20.08.2020. Photo: Christian Charisius/dpa (Photo by Christian Charisius/picture alliance via Getty Images)
Panoramic view over the river Elbe to the harbour of Hamburg. Photo: Christian Charisius/Picture Alliance via Getty Images

Financial market analysts are feeling a lot less upbeat in October about the German economy over the next six months, according to the latest economic sentiment survey from ZEW, the Leibniz-based Centre for European Economic Research.

The ZEW Indicator of analysts’ economic expectations for the six months ahead dropped by 21.3 points to 56.1 points in October.

“The great euphoria witnessed in August and September seems to have evaporated,” said ZEW president Achim Wambach in a statement.

“The recent sharp rise in the number of COVID-19 cases has increased uncertainty about future economic development, as has the prospect of the UK leaving the EU without a trade deal,” Wambach said. He noted that the US presidential election “further fuels uncertainty.”

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German GDP contracted by 9.7% in the second quarter of 2020, compared with the same period in 2019. The government has forecast a contraction of 5.8% in 2020, and GDP growth of 4.4% next year.

Germany’s federal statistics office announced on Tuesday that temporarily lowered VAT and a drop in energy costs drove the German inflation rate in September to its lowest level since January 2015, as consumer prices dropped 0.2% compared with the same month last year.

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Financial experts also felt more pessimistic about the future economic development of the 19-country eurozone in the next half year, with the ZEW indicator dropping 21.6 points to 52.3 points. However, they were slightly more positive about the current situation than during September.