German Economic Sentiment Index Rebounds to 10.5 Amid Geopolitical Tensions De-Escalation

Germany’s ZEW Economic Sentiment Index surged from -10.2 to 10.5 in June, surpassing expectations of -6.0 and marking its first positive reading since 2018. The Eurozone index followed suit, rising from -9.1 to 9.5—well above the -7.2 forecast. However, Germany’s Current Situation Index worsened to -81.0, below the prior -77.8, while the Eurozone gauge inched to -43.4.

ZEW President Achim Wambach attributed the rebound in expectations to de-escalating U.S.-Iran tensions, suggesting reduced risks of energy price shocks and lower inflationary pressures. This welcomed shift, he argued, could boost demand for energy-intensive sectors like manufacturing and improve household purchasing power.

Private consumption optimism rose 11.7 points, while automotive sentiment jumped 21.9 points, chemicals/pharma gained 16 points, and mechanical engineering improved by 9.2 points. Despite progress, most sectors remained negative, with construction sentiment plummeting sharply amid ECB rate hike impacts on financing costs. The Eurozone Economic Sentiment Index, however, defied expectations with a 19.4-point surge to 9.5, signaling cautious bullishness.

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