For a third straight month, the German ZEW index weakened in July. The headline (expectations) index fell from -16.9 to -19.6, very close to the consensus estimate which was looking for a decline to -20.0. The current situation index, on the contrary, weakened sharply, from 33.2 to 22.1, while only a slight drop was expected. The breakdown shows however that weakness was broad-based across sectors. Last month, the German ZEW indicator posted its biggest monthly drop since October 1998, the softer drop this month might be an indication that the decline is starting to flatten out. Last month, also the euro zone PMI’s showed early signs of bottoming out, suggesting that the situation might start to improve somewhat in the second half of the year.
Nevertheless, the significant weakening in the current assessment index suggests that the German economy is still facing significant headwinds.