German economy improves in September but banking remains a concern – Zew

LONDON (ICIS)–The German economy has continued to improve in September despite some worrying indicators, economic research group Zew said on Tuesday.

The Zew Indicator of Economic Sentiment for Germany rose 5.9 points in September, month on month, to 77.4 points.

“Stalled Brexit talks and rising coronavirus cases could not dampen the positive mood,” said Zew president Achim Wambach.

“However, the still negative outlook for the banking sector reveals fears of a rising number of loan defaults in the coming six months.”

The 19-country eurozone’s largest economy is also home to the region’s largest chemicals industry; in 2019, Germany’s chemicals employed around 450,000 workers and posted sales at €193bn.

–
Attitudes towards the current economic situation have also improved although still remain negative at -66.2 points, 15.1 points higher than in August.

EUROZONE LAGS BEHIND
The eurozone’s sentiment also improved in September, compared with August, although at a more modest pace than Germany, said Zew.

Sentiment for the eurozone’s economic development also increased by 9.9 points bringing the indicator to 73.9 points for September.

The current economic situation rose 8.9 points to -80.9 points overall.

STILL PRE-PANDEMIC LEVELS
Increased business confidence suggests that the German economy is tracking a stronger recovery than the eurozone.

“While the current conditions index has improved rapidly, its level remains well below pre-crisis … This shows that the recessionary forces caused by the lockdowns are easing but have not disappeared yet,” said analysts at Oxford Economics.

“Following the strong mechanical post-lockdown rebound, the recovery in the eurozone is flattening out.”

Front page picture: Frankfurt’s financial district; Zew said potential bankruptcies in coming months are putting a strain on Germany’s banking sector
Picture source: Michael Probst/AP/Shutterstock