German economic sentiment improves greatly in July – ZEW

The report from German ZEW economic research institute, released on Tuesday, showed that investor morale rose well above expectations and almost tripled the previous month’s value in July.

ZEW Economic Sentiment jumped to 26.3 in July (the highest since February) from 10.5 in June and well above 15.1 consensus.

German government’s reform package that includes pension, tax and labor overhaul, outlined by Chancellor Friedrich Merz this month, was mainly behind significant improvement in the sentiment and also mainly offset uncertainty about negative impacts from conflicts in Ukraine and the Middle East.

ZEW President Wambach highlighted that the economic outlook continues to improve in July, as a result of positive impact of the reforms.

Economists also expressed optimism, pointing to improving economic data (retail sales, industrial orders and industrial production) in May, signalling that German economy started to gain traction, though remain cautious about further recovery in overall negative environment (political and economic crisis caused by war – high energy prices, elevated inflation, tensions with US President Trump’s administration).