Data published by the Leibniz Centre for European Economic Research (ZEW) showed that the indicator of German economic sentiment declined significantly in May, recording the third monthly decline in a row and reaching a 5-month low.
According to the report, the indicator of economic sentiment fell to -10.7 points compared to 4.1 points in April. Consensus estimates suggested a drop to -5.3 points. Meanwhile, the index of the current economic situation fell by 2.3 points to -34.8 points, but exceeded economists' forecasts (-37 points).
"For the first time since December 2022, the ZEW Indicator is back in negative territory. Financial market experts expect further deterioration of the economic situation in the next six months. As a result, the German economy may slip into recession, albeit a moderate one. The deterioration in sentiment is partly due to expectations of further tightening of the ECB's monetary policy. In addition, a potential US default in the coming weeks adds uncertainty to the prospects of the global economy,” said ZEW President Professor Achim Wambach.
The data also showed that the indicator of economic sentiment in the eurozone fell to -9.4 points (the lowest value since December 2022) from 6.4 points in April. Economists had expected a decline to -1.0 points. This was the third decline in a row. The indicator of the current economic situation rose to -27.5 points from -30.2 points in April.