The influential ZEW survey, which measures institutional in Germany, slipped 1.7 points in October to 56.0. Though a little below expectations, the level remains well above the historical average of 26.7.
Sentiment among analysts in Europe’s largest economy has soared since late last year, and in my view, got a little ahead of itself (see June 16 post Germany optimism on upward trajectory). Germany’s economy is export based and an improvement in the global picture, along with a rise in 2Q GDP, suggests a recovery has likely begun.
However, risks remain and Europe’s banking system still faces headwinds from unrealized loan losses. Hence, sentiment may be peaking.
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