Hopes for an End to the Iran Conflict Are Fuelling a Sharp Rise in Expectations

After the slump in the indicator observed in the spring, the economic outlook brightens in June. The ZEW Indicator rises strongly by 20.7 points, reaching a value of plus 10.5 points. However, assessment of the current economic situation shows a slight decline: The situation indicator for Germany is at minus 81 points, which is minus 3.2 points below the previous month’s reading.

“The ZEW Indicator returns to positive territory as financial market experts expect the Iran conflict to be nearing an end. This is likely to ease the massive pressure on energy prices and inflation, which would benefit energy-intensive industries and private households and would strengthen domestic demand,” comments ZEW President Professor Achim Wambach, PhD on the current survey results.

The different industries reflect these improved expectations. The automotive sector – suffering various declines in the past months – shows a balance increasing by 21.9 points. In the chemical and pharmaceutical industries as well as the mechanical engineering sector, the positive changes in the balances are pronounced, with an increase of 16 points and 9.2 points, respectively. Expectations regarding private demand improve by 11.7 points compared to the previous month. Despite these strong increases, the balances in these industries remain in negative territory. The construction industry records a decline in June, the indicator dropping by minus 15.2 points to a balance of minus 12 points. The ECB’s recent interest rate hike of 11 June likely has contributed to this development.

Expectations for the eurozone show strong growth again in June. At a balance of 9.5 points, the indicator is 18.6 points higher than in May. The assessment of the economic situation remains negative at minus 43.4 points and are thus minus 2.0 points below the previous month’s reading.