The April 2025 economic sentiment indicator plunged to minus 14.0 points, marking a dramatic 65.6-point fall from the previous monthGermany's steepest drop in expectations since the onset of the Russia-Ukraine conflict in 2022. This sharp downturn reflects growing anxiety among financial experts, triggered by unpredictable shifts in US trade policy and looming tariff threats fuelling global uncertainty.

While sentiment has nosedived, the assessment of Germany's current economic conditions remained in deep negative territory but showed slight improvements, rising by 6.4 points to minus 81.2, 4.8 points above the consensus. The deep negative reading continues to highlight the fragility of the recovery. Export-heavy sectors, including automotive, chemicals, and engineeringpreviously showing optimismare now particularly vulnerable to rising trade tensions. Sentiment across the euro area echoed Germany's gloom, with the outlook tumbling to minus 18.5 points and current conditions at minus 50.9.

Though inflation risks are not currently viewed as pressing, this has opened the door for potential interest rate cuts by the ECB. However, uncertainty remains high, particularly around whether the US Federal Reserve will follow suit. Overall, April's data signals renewed pessimism and rising volatility in the eurozone's economic narrative. This latest update takes the German RPI to minus 12 and the RPI-P to minus 7, meaning that economic activities remain slightly behind market expectations of the German economy.

With things looking up in Germany, current conditions are expected at minus 86.0 versus minus 87.6 a month ago. Economic sentiment is seen fading to 10.0 after rocketing to 51.6 in March from 26.0 in February.

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.