Economic Expectations Show Signs of Improvement

After two consecutive months with strong declines in economic expectations, the economic outlook brightens again in May. The ZEW Indicator rises by 7.0 points and is now at minus 10.2 points, which means it is still in negative territory. The assessment of the current economic situation has slightly deteriorated, however. The situation indicator for Germany is at minus 77.8 points, which is minus 4.1 points below the previous month’s reading.

“Expectations are improving but stay in negative territory. The financial market experts are hoping that the Iran war will end soon. Nevertheless, weak industrial production, rising energy prices and an inflation rate that exceeds the two-per-cent mark continue to burden the German economy. There is cautious hope for a potential recovery in the second half of 2026, provided that the Middle East conflict eases and the government’s economic stimulus measures are having an effect,” comments ZEW President Professor Achim Wambach, PhD on the current survey results.

The changes in the balances of the different industries present a heterogenous picture. The automotive sector’s indicator has worsened substantially and is at minus 57.2 points (minus 13.0 points compared to the previous month). Mechanical engineering, too, records a minus, the indicator for May reading at minus 32.1 points (minus 9.2 points compared to April). The change in the balance of private demand is also worth noting: Already in negative territory, it continues to fall by minus 41.6 points (minus 8.2 points compared to April). However, a few industries show improvements in May. Prospects brighten in the information technology industry in particular; here, the indicator climbs by plus 12.1 points (balance at 56.6 points). The metal production sector and the construction industry also record an upward trend.

The expectations for the eurozone show strong growth in May. The indicator is 11.3 points higher than in April, and is at minus 9.1 points. The assessment of the economic situation improves slightly: At minus 41.4 points, it exceeds the previous month’s reading by 1.6 points.