BERLIN
Investor confidence in Germany‘s economic outlook plummeted in August following the EU-US trade agreement, as measured by the ZEW expectation index.
The European Centre for Economic Research (ZEW) released its August data on investor and analyst expectations.
The ZEW expectation index for Germany dropped to 34.7 points from 52.7 in July, falling short of the median forecast of 39.5.
Europe’s largest economy, Germany, is grappling with tough times as hopes for a swift recovery after two years of contraction are shaken by U.S. President Donald Trump’s imposition of 15 percent tariffs on nearly all German exports to the U.S.
This trade tension is exacerbating a fragile political environment where support for Chancellor Friedrich Merz is waning.
ZEW President Achim Wambach said financial market experts are disappointed by the trade agreement between the European Union (EU) and the U.S.
Wambach emphasized that Germany’s second-quarter performance also contributed to the index’s decline.
Wambach further noted a worsening outlook particularly for the chemicals and pharmaceuticals sectors, with machinery engineering, metals and automotive industries also severely impacted.
With major industrial firms lowering expectations, the likelihood of economic contraction this year has risen.
Despite hundreds of billions of euros in spending expected to stimulate the economy long-term, the Bundesbank anticipates no growth this year. Reinforcing the stagnation, factory orders unexpectedly fell for the second straight month in July, while industrial production suffered its sharpest decline in nearly a year.