Data published by the Leibniz Centre for European Economic Research (ZEW) showed that the indicator of German economic sentiment rose again in January, exceeding economists' forecasts, and reaching its highest level since February 2023. In contrast, the assessment of the economic situation has remained virtually unchanged.
According to the report, the indicator of economic sentiment rose to 15.2 points compared to 12.8 points in December. The index remains in positive territory for the third month in a row. Economists had expected the index to fall to 12.1 points. Meanwhile, the index of the current economic situation fell to -77.3 points from -77.1 points in December.
“Germany's economic expectations have improved again. This is due to the fact that now more than half of the respondents assume that the ECB will lower interest rates in the first half of the year. There are even more pronounced changes in US interest rate expectations. More than two thirds of respondents predict a reduction in the Fed's interest rates in the next six months. The rise in inflation in Germany and the eurozone in December thus has no impact on the monetary policy expectations of the respondents,” said ZEW President Professor Achim Wambach.
The data also showed that the indicator of economic sentiment in the eurozone fell to 22.7 points from 23.0 points in December. Consensus estimates suggested a drop to 21.9 points. The indicator of the current economic situation rose to -59.3 points from -62.7 points in December and inflation expectations rose to -56.8 points from -58.2 points.