Investor Confidence in German Rebound Unexpectedly Strengthens
The German national flag flies above the Reichstag building as Germany takes over the European Union’s rotating six-month presidency, in Berlin, Germany. (Photographer: Krisztian Bocsi/Bloomberg)

Investor Confidence in German Rebound Unexpectedly Strengthens

Investors unexpectedly raised their expectations for Germany’s recovery, adding to signs that Europe’s largest economy may bounce back more quickly from coronavirus restrictions than its neighbors.

A gauge measuring prospects for the next six months rose to 71.5 in August. Economists had expected a small drop. A measure of current conditions edged lower.

Investor Confidence in German Rebound Unexpectedly Strengthens

“Hopes for a speedy economic recovery have continued to grow, but the assessment of the situation is improving only slowly,” ZEW President Achim Wambach said.

Recent data suggest the country’s manufacturing sector followed private consumption out of a record second-quarter slump. Retail sales have already made up for the ground lost during lockdowns, and trade indicators are also signaling a revival.

Germany’s Bundesbank predicts the nation’s economy will continue to heal in the second half, helped in part by the governments latest stimulus package.

Even so, the broad expectation is that a full economic recovery to pre-crisis levels will take time, and could be subject to setbacks. Rising infections have highlighted the risk over another flare-up and a fresh round of restrictions.

The recovery in neighboring France is already slowing, according to the country’s central bank, which said on Monday that activity was 7% below normal levels in July. Indicators for August suggest little to no improvement.

Renewed trade tensions between the U.S. and China -- two of Germany’s major export markets -- could also prove disruptive. European Central Bank Chief Economist Philip Lane has cautioned against any premature optimism, arguing that the third quarter will be key to determining the strength and sustainability of the recovery.

©2020 Bloomberg L.P.

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