Automotive industry finds renewed optimism, as indicated by the surprise in the ZEW index
The German economy, Europe's largest, is expected to see minimal growth in 2025, according to recent assessments. This comes after a deterioration in the current economic situation, with the economic sentiment index falling by 7.8 points to -76.4 points.
Economists had anticipated a decline to 25 points on average for the economic sentiment index. However, the reality has been more stark, reflecting concerns about the state of the economy.
Leading economic research institutes, including the Ifo, have revised their forecasts for the German economy, painting a picture of a slowing economy. The auto industry, in particular, is experiencing a deterioration in mood, with exporters facing difficult times in the third year without economic growth.
Despite these challenges, there are signs of optimism. Economists are optimistic about noticeable growth next year, buoyed by multi-billion-euro packages from the federal government for defense and infrastructure. The outlook for export-oriented industries, which have recently experienced a downturn, has improved.
The improved outlook is also attributed to a turn in sentiment in the automotive trade, and a return of consumer mood. This optimism is not least due to the tariff agreement between the USA and the EU, which has ended a period of uncertainty for exporters.
Since August 7, most EU imports to the USA have been subject to tariffs of 15 percent. However, the economic sentiment index of the ZEW research institute in Germany rose by 2.6 points to 37.3 points in August, suggesting that businesses are cautiously optimistic about the future.
ZEW President Achim Wambach commented that financial market experts are cautiously optimistic, acknowledging that the risks remain significant due to uncertainty about US trade policy and the German 'autumn of reforms'.
Despite the challenges, the chemical and pharmaceutical industry, as well as the automotive industry, are benefiting from the improved outlook. Economists predict at most a minimal growth in 2025, but the optimism is a positive sign for the future of the German economy.
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