ZEW's August survey found a further worsening in analysts' assessment of the German economy but a slightly less pessimistic view of the future. Compared with the market consensus, the picture was similarly mixed.

The current conditions index fell a sizeable 11.8 points to minus 71.3, well below most forecasts. This was its fourth straight decline and its weakest reading since last October. The measure has now shed nearly 39 points since April. However, at the same time, economic sentiment (expectations) rose 2.4 points to minus 12.3. This was its second increase in the last three months but still only a 2-month high and some 40.4 points short of the 2023 high seen in February.

The deterioration in current conditions should come as no great surprise with the economy having (again) failed to register any growth last quarter and more recent data arguing against any meaningful improvement this month. With tentative signs that core inflation is beginning to ease, the modest rise in expectations probably reflects hopes that ECB tightening is nearing an end. However, the bottom line is that German economic activity is struggling in general, albeit by no more than the forecasters predicted. The German ECDI stands at 9 and the ECDI-P at 10.

Current conditions are expected to erode to minus 62.3 in August versus July's minus 59.5. Expectations (economic sentiment) are expected to improve slightly to minus 14.4 versus July's minus 14.7.

The Mannheim-based Centre for European Economic Research (ZEW), asks German financial experts every month for their opinions on current economic conditions and the economic outlook for Germany (as well as other major industrial economies). The responses are synthesised into two simple indices that provide a snapshot of how the economy is seen to be performing.

The ZEW Indicator of Economic Sentiment is calculated from the results of the ZEW Financial Market Survey. The ZEW is followed closely as a precursor and predictor of the Ifo Sentiment Survey and as such is followed closely by market participants. The data are available around mid-month for the current month. The survey provides a measure of analysts' view of current economic conditions as well as a gauge of expectations about the coming six months. The latter measure tends to have the larger market impact and reflects the difference between the share of analysts that are optimistic and the share of analysts that are pessimistic. About 350 financial experts take part in the survey.