German investors’ optimism about economic outlook grows
Lifting of coronavirus lockdowns helps fuel confidence in future prospects
Investors are growing more bullish about a German economic rebound as the government steadily lifts the lockdown it imposed to contain the spread of coronavirus, according to a survey of investors.
The Zew poll of German investors, which was published on Tuesday, found that sentiment about the outlook for Europe’s virus-stricken economy had surged to its highest level in years, even as their assessment of the current economic climate worsened to its lowest point for more than a decade.
“Optimism is growing that there will be an economic turnround from summer onwards,” said Achim Wambach, Zew president. “According to the financial market experts surveyed, economic growth is expected to pick up pace again in the fourth quarter of 2020.”
But Mr Wambach said most investors still believed a full economic recovery from the pandemic would take two years, adding: “Only in 2022 will economic output return to the level of 2019.”
The Zew survey of 202 analysts and investors, which was carried out last week, found they anticipated a sharp economic rebound now lockdowns are being loosened. For the first time in two months, Germans are able to eat out at restaurants, get their hair cut or go to the gym, albeit with social-distancing rules in place.
Sentiment about the German economic outlook rose by 22.8 points month-on-month to reach a five-year high of 51 in May. However, the gauge of sentiment about the current economic situation in Germany fell by 2 points to minus 93.5.
Investors’ assessment of the current eurozone economic climate dipped even lower to minus 95, though their outlook for the eurozone economy also rebounded — albeit slightly less strongly — to 46 points.
While most economists expect Germany to suffer its deepest postwar recession this year, there are growing expectations that it will emerge from the crisis in better shape than many other European countries, which have had stricter lockdowns.
“The lifting of the lockdown measures, as well as the huge fiscal support by the German government — more than 30 per cent of GDP — support the view that the German economy could leave the crisis earlier and stronger than most other countries,” said Carsten Brzeski, economist at ING.
In the first three months of this year, the German economy shrank 2.2 per cent quarter on quarter, much less than the 3.8 per cent decline in the eurozone as a whole. France’s economy shrank 5.8 per cent in the first quarter, while Spain’s contracted by 5.2 per cent and Italy’s by 4.7 per cent.
On Monday, the Bundesbank added to the more optimistic mood by saying there was “much to suggest that overall economic developments will move up again in the course of the second quarter as a result of the easing measures and a recovery being under way”.
Economists are tracking real-time economic indicators, such as the volume of heavy goods vehicles on toll roads, electricity use, customers in stores and passengers on public transport. Many of these indicators suggest that activity has been picking up in Germany since the lockdown started to be lifted in late April, although it is still below normal levels.
“As many European countries have started to ease their lockdowns, the outlook, albeit still uncertain, is turning less uncertain,” said Florian Hense, economist at Berenberg. “Both activity and sentiment have started to recover, and should gather more pace by the day.”