Germany and the eurozone’s economic sentiment collapsed in August, ringing alarm bells across the continent.
The ZEW Economic Sentiment Index, which measures the economic outlook for Germany and the Eurozone over a six-month period, dropped more than 20 points between July and August, going from 41.8 to 19.2.
While financial experts were geared up for a slump, market expectations were set at a decrease to 32 points.
The Eurozone’s broader economic sentiment also deteriorated, with the corresponding index hitting its lowest point since February and plunging well below the expected 35.4, as it went from 43.7 to 17.9 points.
This marks the most severe monthly deterioration in the Eurozone’s economic morale since April 2020, at the height of the coronavirus crisis.
Despite the huge slump, the assessment of the Eurozone’s economic situation showed a small but important improvement, as it rose by 3.7 points to minus 32.4.
On the other hand, the same indicator for Germany suggested the economic situation in the country has worsened, with the relevant index falling by 8.4 points to minus 77.3.
Assessing the survey results, ZEW President Professor Achim Wambach, PhD said, as reported by Euronews: “The economic outlook for Germany is breaking down. In the current survey, we observe the strongest decline of the economic expectations over the past two years.”
Once regarded as the Eurozone’s economic powerhouse, Germany has seemingly become the sick man of Europe in recent years, weighed down by a series of economic challenges including a global slowdown in exports.
Growing fears of a regional war in the Middle East, an ambiguous monetary policy by Olaf Scholz’s government and disappointing business reports from the US have contributed to the decline in the economic sentiment, Professor Wambach said.
Earlier this month, fears of a global recession erupted after markets across the world slumped in light of the publication of a disappointing employment report in the States, data showing weakness in the US manufacturing sector and growing concerns regarding a potential Federal Reserve interest rate cuts.
