German investor confidence kept up a sharp rebound in May after surging in April, a closely-watched survey showed  yesterday, reflecting “confidence in an economic turnaround” after blows from the coronavirus.
The ZEW institutes’s monthly barometer of economic expectations for the coming months leaped 22.8 points this month for a reading of 51, continuing to shake off a steep plunge into negative territory in March.
“Confidence is growing that an economic turnaround will begin in summer,” ZEW chief Achim Wambach said in a statement.
“Nevertheless, it will take a long time to get back to where we were,” Wambach added, saying the roughly 200 financial market experts surveyed see output returning to last year’s levels only in 2022.
Germany is inching out of a nationwide lockdown imposed to slow the virus’ spread, with shops, restaurants and factories gradually reopening.
Corresponding to the slow restart, the ZEW index measuring views of the present economic situation for Europe’s top economy fell back slightly, remaining deep in negative territory at -93.5 points.
Survey respondents’ views of the economic situation in the 19-nation eurozone were also negative at -95 points, but the outlook for the currency bloc also surged more than 20 points in May, landing slightly below German expectations at 46.
While Germany has been affected less than neighbours like France, Italy or Britain in numbers of deaths from the coronavirus, shutdowns across Europe and further abroad have hit its interconnected economy hard.
Hoping to kick-start an economic rebound, Chancellor Angela Merkel and French President Emmanuel Macron presented plans Monday for a €500bn ($548bn) European recovery fund to be backed by joint debt.
While other capitals remain to be convinced, the plan represents a retreat from German opposition to any form of shared debt between the EU’s 27 member nations.
Meanwhile, Germany’s DIHK chambers of industry and commerce expect Europe’s largest economy to shrink at least 10% this year due to the coronavirus crisis, its president said on Tuesday, a much more pessimistic view than the government’s forecast.
“This year, and there is no way around it, we will witness a historic economic downturn,” DIHK President Eric Schweitzer said when presenting the association’s latest survey of industrial companies.
The DIHK’s expectation for an economic plunge in the double-digit percentage range compares with the government’s forecast for a record contraction of 6.3% in 2020.
“German businesses are facing their biggest challenge since the end of World War Two,” Schweitzer said, adding that many industrial companies were facing massive liquidity problems.
The DIHK survey, conducted among some 10,000 industrial companies between May 4-6, showed three-quarters reported declining demand and 80% expected a substantial drop in sales.
Nearly 50% of German industrial companies are putting investments on hold and are planning to cut their budgets because of the coronavirus pandemic, it said.
Due to the disruptions caused by the outbreak in many countries across the globe, almost a fifth of German industrial companies are currently reorganising their supply chains, the survey showed.
“World market shares are currently being redistributed,” Schweitzer said.
DIHK trade expert Volker Treier said he expected German exports to decline by 15% this year, due to weaker demand from major export markets such as the United States.
For 2021, DIHK is expecting the economy to grow by roughly 5%, Schweitzer said.
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