Germany's economic sentiment witnessed a significant boost in February 2025, with the ZEW indicator of economic sentiment surging to 26.0 pointsan impressive 15.7-point rise from the previous month, marking the strongest increase in two years. While optimism about future economic prospects is gaining momentum, assessments of the current situation remain deeply negative, improving only slightly to minus 88.5 points, 0.5 points above the consensus.

This surge in confidence appears linked to hopes for a more effective government following the federal election. Additionally, the expectation of recovering private consumption after a prolonged demand slump has fuelled positive sentiment. The ECB's recent interest rate cut, aimed at stimulating economic activity, catalyses renewed optimism, particularly in the construction sector.

The Eurozone mirrors this trend, with its sentiment indicator rising by 6.2 points to 24.2, while perceptions of the current economic situation improved by 8.5 points to minus 45.3. While challenges persist, the financial market's outlook suggests growing confidence in an economic rebound, contingent on policy stability and continued monetary support. The coming months will determine whether this optimism translates into real economic recovery. The latest update brings the German RPI to 3 and RPI-P to 25. This means that economic activities are well ahead of market expectations for the German economy.

Economic sentiment among investors seems to be recovering a bit in February. Current conditions are expected at minus 89.0 versus minus 90.4 in January and minus 93.1 in December. Economic sentiment is seen up to 17.5 from 10.3 in January, which was down more than expected from 15.7 in December.

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.