Hopes for ‘speedy’ recovery rise in Germany but financial services cause concern – Zew

LONDON (ICIS)–German financial analysts are growing in confidence that the recovery in the country could be faster than expected, but the banking and insurance sectors could put a drag on the economy as they deal with the consequences of the coronavirus pandemic, research institute Zew said on Tuesday.

The Zew Indicator of Economic Sentiment for Germany rose to 71.5 points in August, up 12.2 points from in July.

The assessment of the current situation has worsened slightly, however, with the corresponding indicator decreasing 0.4 points to minus 81.3 points in August.

“Hopes for a speedy economic recovery have continued to grow, but the assessment of the situation is improving only slowly,” said Zew’s president Achim Wambach.

“However, the still very poor earnings expectations for the banking sector and insurers regarding the coming six months give cause for concern.”

Analysts at Oxford Economics said Germany’s GDP this year is still expected to fall by 6%, but that would be a better performance than eurozone peers.

The economies of France, Italy, and Spain are expected to contract more than 10% this year.

Germany’s export-oriented economy will fare better, as internal consumption and recovering manufacturing sectors like automotive power ahead.

“The subdued current conditions index indicates that the German economy is still suffering from the impact of the pandemic,” added Oxford Economics analysts.

“This supports our view that the recovery will be more difficult beyond the initial bounce in activity when the lockdown ended.”

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EUROZONE: SLOWER
Zew also gathered financial analysts’ expectations for the eurozone, also registering an increase in optimism but lower than Germany’s levels.

The corresponding indicator rose 4.4 points in August to 64.0 points.

The indicator for the current economic situation in the eurozone fell 1.1 points to a level of minus 89.8 points, also lower than Germany’s levels.