Investors See German Economy Improving at End of Second Quarter

(Bloomberg) -- Investors see some signs that the recovery in Europe’s largest economy has started to take off.

A ZEW gauge of current conditions in Germany advanced in June, and expectations for the next six months continued to improve. The data underscore hopes that the economy will grow again in the second half of 2020.

The country’s government has made more than 1.3 trillion euros ($1.5 trillion) in stimulus available to encourage spending and keep struggling businesses afloat. While that hasn’t prevented numerous insolvencies and hundreds of thousands of lob losses, the Bundesbank said earlier this month that Germany had probably already passed the trough of its deepest postwar slump.

Still, the economic recovery from the coronavirus pandemic is likely to be muted as some restrictions to rein in the spread of the disease remain in place. Output this year is forecast to shrink more than 7%, according to Bundesbank projections, before regaining ground in the subsequent two years.

“There is growing confidence that the economy will bottom out by summer 2020,” ZEW President Achim Wambach said. “Financial market experts continue to expect only a slow increase in economic value added in the third and fourth quarters.”

On a regional level, ZEW’s report showed that investor expectations for the wider euro area have also improved.

European Union leaders are gathering this week to discuss a proposed 750 billion-euro package to revive the economy with grants and loans. European Central Bank Executive Board member Fabio Panetta praised the initiative in an interview published Tuesday and encouraged quick decisions.

“It is extremely urgent and the aim should be to deploy it as soon as possible, no later than early 2021,” he told Le Monde. “European authorities have shown a remarkable awareness of the need to intervene. I remain optimistic.”

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