The December ZEW Economic Sentiment survey delivered a notable improvement in outlook for both Germany and the Eurozone, driven by optimism surrounding interest rate cuts and policy shifts.
German ZEW Economic Sentiment index surged to 15.7 from 7.4, far exceeding expectations of 7.0. However, Current Situation Index continued to deteriorate, slipping further to -93.1 from -91.4, reflecting ongoing economic weakness in the near term.
Eurozone ZEW Economic Sentiment also showed a strong uptick, rising to 17.0 from 11.6. Yet, the Current Situation Index revealed a sharper decline, falling 11.2 points to -55.0.
ZEW President Achim Wambach attributed the improved sentiment to expectations of economic policies favoring private investment, particularly as Germany approaches snap elections.
Additionally, growing confidence in further ECB interest rate cuts next year has bolstered the outlook. Wambach noted that survey respondents remain unconcerned about inflation, suggesting the recent uptick is viewed as “a temporary phenomenon” and inflation rates are expected to stabilize or decline in 2025.
