German ZEW Economic Confidence Deteriorates On Trade Deal

RTTNews | 3 days ago

(RTTNews) - Economic sentiment in Germany deteriorated sharply in August due to the disappointing trade agreement reached with the United States, and also due to the declining economic output in the second quarter, results of the monthly survey conducted by the think tank ZEW showed on Tuesday.

The ZEW Indicator of Economic Sentiment plummeted to a three-month low of 34.7 in August from 52.7 in the previous month. The score was below the forecast reading of 39.7.

"Financial market experts are disappointed from the announced EU-US trade deal," ZEW President Achim Wambach said.

The ZEW indicator also experienced a substantial decline due to the poor performance of the German economy in the second quarter, Wambach noted.

The ZEW president observed that the outlook has worsened in particular for the chemical and pharmaceutical industries. The mechanical engineering and metal sectors as well as the automotive industry were also severely affected, he added.

The assessment of the current economic situation also deteriorated in August. The corresponding indicator slid 9.1 points to minus 68.6 points.

According to the trade deal reached by the EU and the US in July, the latter will charge a tariff of 15 percent on the EU goods, which is half of the 30 percent levy that the U.S. President Donald Trump had threatened to impose previously.

Also, the EU agreed to invest $600 billion in the U.S. by 2029 and purchase $750 billion of U.S. energy exports through 2028.

Official data showed that the largest Eurozone economy shrank 0.1 percent in the second quarter, reversing the 0.3 percent growth in the first quarter.

The overall euro area fared better than Germany. Nonetheless, Eurozone GDP growth eased to 0.1 percent from 0.6 percent in the first quarter.

The ZEW survey also showed a decline in economic confidence in the euro area. The economic sentiment index dropped 11.0 points to 25.1 in August. Similarly, the current situation indicator fell 7.0 points to -31.2.

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