German economic sentiment improved well above expectations in March – ZEW

German investor morale improved much more than expected in March, fueled by fresh signals that the ECB may start cutting interest rates soon and better than expected recent economic data from China.

ZEW economic institute report showed a significant improvement in German economic sentiment, as the index rose to 31.7 points in March from 19.9 in February, and strongly beat expectations for rise to 20.5.  

ZEW President highlighted growing bets that the ECB will cut interest rates in next six months and improved sentiment in German export sector, which is expected to strongly benefit by faster than expected recovery of Chinese economy. 

ECB policymaker said that the central bank will be likely in the position to discuss interest rate cut in June after receiving fresh information on inflation, economic growth and wages, boosting existing hopes that the ECB may put potential start of rate cuts on the table on bank’s June policy meeting.

Better than expected data from Chine added to optimism that post-Covid recovery in the world’s second largest economy is picking up, as upbeat industrial production, retail sales and recent export numbers, contribute to encouraging signals about the solid start of the year.

Solid German economic data add to hopes that the worst is behind and that economic recovery in the Europe’s largest economy is likely going to accelerate further in coming months.