Germany's Economic Outlook Plunges to 11-Month Low

Germany's economic sentiment took a steep downturn in September, with the ZEW Economic Sentiment Index falling from 19.2 points in August to just 3.6 points, the lowest since October 2023 and far below the forecast of 17 points. 

This decline highlights a deepening confidence slump in the eurozone's largest economy. The sub-index for current conditions also dropped sharply to -84.5 points, down from -77.3 in August and well below the expected -80 points, marking its weakest reading since May 2020. 

Expectations for the next six months have worsened across most industries, with mechanical engineering, steel, automotive, and banking facing the most significant declines. In contrast, construction, utilities, and telecommunications sectors showed a more optimistic outlook.

This economic malaise extended to the broader eurozone, where the ZEW index fell from 17.9 points to 9.3 points, missing the forecast of 16.3 points. Despite rising pessimism, Germany’s decline was notably steeper. 

Germany’s automotive sector continues to struggle, with major automakers like Mercedes-Benz, Porsche, Volkswagen, and BMW seeing double-digit share declines, ranging from 10% to 28% this year. 

European assets reacted minimally to the ZEW report; the euro remained at 1.1138 against the dollar, while bund yields fell to 2.10%. German stocks edged up, with the DAX rising 0.6%, led by gains in companies like Zalando SE, Infineon AG, and Siemens. Most financial experts have already factored in the European Central Bank's upcoming interest rate decision, indicating that economic sentiment is not expected to improve soon