In May 2025, Germany's economic outlook rebounded impressively, with economic sentiment rising by 39.2 points to 25.2, recovering much of April's sharp decline. This renewed optimism is linked to political stability, easing trade tensions, and signs of inflation stabilisation. Despite this upbeat forecast, the current economic reality remains stark: the indicator for Germany's present situation stands at a profoundly negative minus 82.0, the weakest among surveyed countries, reflecting persistent stagnation.

Sectoral expectations, however, are lifting. Positive sentiment has surged across banking, automotive, chemical, metal, and machinery industries, spurred by recent ECB interest rate cuts and hopes for more to followparticularly boosting confidence in construction. Importantly, a revival in domestic demand is expected in the next six months, a potential catalyst for growth.

The eurozone mirrors this cautiously hopeful mood. Its sentiment indicator jumped to 11.6 points, up 30.1 from April, with modest gains in current condition assessments. Together, these shifts suggest that while Europe's economic recovery remains fragile, expectations are decisively turning positive, offering a glimmer of momentum after a long period of uncertainty.

Current conditions expected at minus 77.0 in May versus minus 81.2 in April. Economic sentiment is seen up to 0 from minus 14.0 in April after a tremendous drop from 51.6 in March as investors reacted to economic uncertainty unleashed by US tariffs.

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.