“Liberation Day” Causes ZEW Indicator to Plunge

The ZEW Indicator of Economic Sentiment for Germany fell markedly in the April 2025 survey. At minus 14.0 points, it is minus 65.6 points below the previous month’s reading and thus again in the negative range. This is the strongest decline in expectations since Russia invaded Ukraine in 2022. By contrast, assessments of the current economic situation have slightly improved. The corresponding indicator for Germany has increased by 6.4 points and is now at minus 81.2 points, and thus is still clearly below zero.

“The erratic changes in the US trade policy are weighing heavily on expectations in Germany, which have sharply declined. It is not only the consequences the announced reciprocal tariffs may have on global trade, but also the dynamics of their changes, that have massively increased global uncertainty. The economic expectations for Germany and the Eurozone reflect this development,” comments ZEW President Achim Wambach, PhD on the recent results. In particular, export-intensive sectors, such as the automobile and chemical industries as well as the metal, steel and mechanical engineering sectors, which recently enjoyed improved prospects, are affected. A risk of a new spike in inflation in Germany and the Eurozone is currently not perceived by financial market experts. According to their assessments, this gives the ECB leeway to boost the economy by further interest rate cuts. Opinions are divided, however, as to whether the Fed would adopt an easing of monetary policy.

The financial market experts’ sentiment concerning the economic development in the Eurozone has also plummeted: The indicator fell by minus 58.3 points and is currently at minus 18.5 points. The assessment of the current economic situation of euro area has deteriorated as well, albeit less strongly. At minus 50.9 points, it is minus 5.7 points below the March reading.