Eurozone and Germany’s economic sentiment indicators decline sharply in September - ZEW

The ZEW economic research institute reported on Tuesday that its investor sentiment index for Eurozone plunged 11.6 points to 31.1 points in September. This was the lowest level since April 2020.

According to the report, roughly 12.8 percent of respondents expected a deterioration in economic activity, while 43.3 percent forecast no changes and 43.9 percent anticipated an improvement.

At the same time, the ZEW's indicator for the current economic situation in the Eurozone surged 7.9 points to 22.5 points and its inflation indicator for the region plunged 22.1 points to 20.1 points, pointing to the continuing decline in inflation expectations.

The reports also revealed that the ZEW's indicator of economic sentiment for Germany tumbled 13.9 points to 26.5 points in September. This was the lowest reading since March 2020. The assessment of the economic situation in Germany however, went up 2.6 points to 31.9 points. The current reading of the ZEW Indicator of Economic Sentiment for Germany implies that over the next six months economic growth in Germany will only slightly be higher than its current rate, the report said.

“Expectations fell markedly once more in September 2021,” noted ZEW President Professor Achim Wambach. “Although financial market experts expect further improvements of the economic situation over the next six months, the expected magnitude and the dynamics of the improvements have decreased considerably. Global chip shortage in the automobile sector and shortage of building material in the construction sector have caused a significant reduction in profit expectations for these sectors. This may have had a negative effect on economic expectations.”