ZEW's February survey found analysts adopting a more negative view of the current state of the German economy but also a more optimistic assessment of the economic outlook. Versus market expectations, the results were again similarly mixed.

The current conditions index dropped a further 4.4 points to minus 81.7. This was its second successive decline and the lowest level since June 2020. Indeed, the latest print is some 66 points short of its pre-Covid mark. However, economic sentiment (expectations) rose for a seventh straight month and, at 19.9, posted its best reading since February 2023.

In line with recent months, the upswing in sentiment suggests analysts are becoming increasingly optimistic about prospective cuts in ECB interest rates in 2024. The surprisingly recent sharp fall in inflation will similarly have boosted confidence in the future. Even so, the low level of the current conditions measure suggests ongoing concerns about the state of economy at the start of the year and could well be reflected in recession by the end of the quarter. Still, today's update puts the German RPI at 11 and the RPI-P at 13, both readings showing economic activity in general running a little ahead of forecasts.

Current conditions are expected to fall in February to minus 79.0 versus January's minus 77.3 which, for a third month in a row, was lower than expected. Expectations (economic sentiment) are expected at 18.0 versus January's 15.2 which, for the sixth month in a row, was higher than expected.

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.