German ZEW indicator of economic sentiment decreased from +10,6 points in May to minus 16,9 points in June, below consensus of +2,0 points. Also the assessment of the current economic situation for Germany has worsened. The corresponding ZEW current situation indicator has decreased in June by 10,9 points, to the 33,2 points-mark.
Our view:
The decline in ZEW economic sentiment indicator in June turned out worse than expected and was the strongest monthly decline in ZEW since October 1998. This shows that majority of those surveyed currently expect economic conditions in Germany to worsen within the next 6 months, for the first time since January 2012. As suggested by ZEW institute, the worsening of the situation in the Spanish banking sector and the insecurity about the outcome of the Greek general election, are likely to have contributed to the sharp decline of the indicator. ZEW has never been the best leading indicator for German GDP growth dynamics, but nevertheless such a decline is meaningful. Importantly, ZEW is constructed based on opinions from analysts and investors mostly from big German banks. In contrast, the IFO survey questions business leaders and senior managers from all sectors excluding the financial sector. June IFO index is scheduled for release this Friday and is also expected to worsen compared to what was recorded last month.