Eurozone September investor confidence sinks to lowest level since late 2022

LONDON (ICIS)–Little-to-no sign that Germany has recovered from its winter recession continued to weigh on weak investor sentiment in the eurozone, with the outlook cooling to its weakest since November 2022, according to research institute sentix.

The Germany-based group’s monthly sentiment index, based on a survey of financial market investors, fell to -21.5 points in September, which was below expectations and the most bearish since the European energy crisis late last year.

Sentiment in the region has been dragged down by Germany, the currency bloc’s largest economy, which is suffering from a situation comparable to the protracted downturn seen in the wake of the 2008 financial crisis or the period during COVID-19 lockdowns.

The sentix sentiment index for Germany fell to -33.1, the lowest level since October 2022, in the wake of economic data indicating the country stagnated in Q2. German GDP fell 0.1% in Q1 and 0.4% in Q4 2022..

“Germany is once again “the weak man of Europe”. The complete lack of economic competence in the political leader-ship and the enormous uncertainties for the economy caused by the energy and electricity crisis are dragging the German economy deeper and deeper into recession,” said sentix managing director Manfred Hubner.

Future expectations also fell compared to August amid sentiment that economic momentum in the US is slowing.

Germany’s prominence in the eurozone economy and still-stubborn inflation, which fell from 6.2% in July to 6.1% in August, precludes scope for the European Central Bank (ECB) to adopt a looser monetary policy, which is also having a cooling effect on the bloc, Huber said.

“The German economy, by far the largest economy… in the euro zone, is burdening the entire currency zone with a deep recession,” he said.

“This poses a double problem for the ECB. The dynamics of the economy would actually justify a looser monetary policy, but in Germany, of all places, inflation is proving to be particularly stubborn,” he added.

Thumbnail picture: A Volkswagen production line in Zwickau, Germany. Source: Martin Divisik/EPA-EFE/Shutterstock