German Economic Sentiment Plunges On Trade Tariff Concerns

(RTTNews) - German economic sentiment logged its sharpest fall since Russia invaded Ukraine in early 2022, as the changes in the US trade policy added global uncertainty, a closely watched survey published by think tank ZEW showed Tuesday.

The ZEW Indicator of Economic Sentiment declined sharply to -14.0 in April from +51.6 in March. The indicator turned negative for the first time since October 2023 and also reached the lowest level since July 2023.

On the other hand, current economic situation improved in April. The corresponding index rose 6.4 points to -81.2. The expected level was -86.0. Nonetheless, the score remained clearly below zero.

The erratic changes in the US trade policy are weighing heavily on expectations in Germany, ZEW President Achim Wambach said. "It is not only the consequences the announced reciprocal tariffs may have on global trade, but also the dynamics of their changes, that have massively increased global uncertainty," said Wambach.

Export-intensive sectors, such as the automobile and chemical industries as well as the metal, steel and mechanical engineering sectors, which recently enjoyed improved prospects, were largely affected.

However, a risk of a new spike in inflation in Germany and the Eurozone was not perceived by financial market experts.

"According to their assessments, this gives the ECB leeway to boost the economy by further interest rate cuts," Wambach added.

The survey showed that economic confidence in the euro area declined sharply in April. The confidence index plunged 58.3 to -18.5 in April.

The assessment of the current economic situation also deteriorated in April. At minus 50.9 points, the index was down by 5.7 points from the March reading.