German economic sentiment dips on weakening growth hopes amid pandemic resurgence

Author: Tom Brown


LONDON (ICIS)--Economic sentiment in Germany fell sharply in November, with growth expectations weakening for the country and the eurozone as growing coronavirus infection numbers across Europe slowed growth and forced more countries back into lockdown.

German financial market sentiment cooled by a total of 38.4 points to 39 points between September and November in Zew’s monthly survey of financial market sentiment.

The outlook for the eurozone weakened to 32.8 points over the same period.

Financial markets are increasingly concerned about the slowdown in Germany’s economic recovery, compounded by the lockdown measures adopted domestically and across a growing swathe of EU countries.

Global political developments had less impact on investor outlook, with the US presidential election last week or the looming Brexit date failing to significantly move the needle.

“The Zew Indicator of Economic Sentiment has therefore once again significantly decreased in November, indicating a slowdown of economic recovery in Germany,” said the institute's president Achim Wambach.

“There is also the additional worry that the German economy could head back into recession."

While expectations for the immediate future remain bearish, Zew index monthly figures have remained above 2019 levels, when the index was largely in negative territory for much of the year.

Levels in April 2020, which may stand as a generational nadir for the global economy, were only slightly below levels in August 2019 at -49.5 points, indicating that this year may have redefined the market’s idea of a difficult year.

The fall is unsurprising in light of the worsening health outlook across Europe and the continuing uncertainty brought on by the pandemic, according to analysts at Oxford Economics.

Analysts at Pantheon Macroeconomics were more critical of the report, stating that the headline numbers are ”meaningless” in light of news yesterday of a 90% efficacy rate for Pfizer’s coronavirus vaccine, announced on Monday.

The news sent global stock indices surging, spelling a potential decisive end to the pandemic sometime next year.

“Analysts submitting their answers to the Zew November survey assumed a world in which restrictions on services remain a key part of the economic landscape to contain the virus," said Claus Vistesen, chief eurozone economist at Pantheon.

"Yesterday’s [Monday] news has kindled the hope that the Covid-19 nightmare will now end at some point in 2021.”

Pfizer is expected to apply for an Emergency Use Authorisation with US authorities once the final required safety checks have been concluded, expected in the third week of November, meaning that the most vulnerable in some countries could start to be vaccinated before the year is out.

The process of a wider rollout is expected to extend deep into 2021 even if vaccination begins in December; economies will remain exposed to the impact of coronavirus infection spikes for the time being even in the best-case scenarios.

Front page picture: Closed shopping centre in Essen, Germany, on 2 November as the country entered a month-long partial lockdown to slow the spread of the pandemic 
Source: Martin Meissner/AP/Shutterstock