Economic Sentiment in Germany and Euro Area Declines

The Center for European Economic Research (ZEW) reported a significant drop in German economic sentiment this August. The expectations index plummeted from 52.7 in July to 34.7, falling short of analysts' predictions. Similarly, the current situation index for Germany worsened, dropping by 9.1 points to a concerning negative 68.6.

Euro Area Not Spared

The economic sentiment index for the euro area also faced a downturn, decreasing by 11 points to 25.1. The current situation index wasn't immune either, with a 7-point fall to negative 31.2.

Underlying Causes

ZEW President Professor Achim Wambach highlighted the disappointment among financial market experts regarding the announced EU-US trade deal as a key factor. The poor performance of the German economy in the second quarter of 2025, especially in the chemical and pharmaceutical sectors, further exacerbated the situation.