German economic sentiment strengthened to a five-month high in December as analysts expect the expansive fiscal policy to support economic recovery, the financial market survey conducted by the think tank ZEW showed Tuesday.
The economic sentiment index advanced to 45.8 in December from 38.5 in the previous month, reaching the highest since last July. The score was seen at 38.4.
However, the assessment of the current economic situation deteriorated slightly. The corresponding indicator posted -81.0 compared to -78.7 in the previous month. The reading was forecast to drop moderately to -80.0.
“Expectations have become more positive,” ZEW President Achim Wambach said. “After three years of economic stagnation, chances for a recovery of the economy are good and this is reflected in the sentiment,” said Wambach.
The expansive fiscal policy is expected to provide new momentum to the German economy. However, the recovery remains fragile, noted ZEW President.
“Measures for dealing with persistent trade conflicts, geopolitical tensions and the absence of investments are likely to figure on the reform agenda for 2026 as well,” Wambach added.
The research institute noted that the situation of the automobile industry improved in December.
Other export-oriented sectors, such as the chemical and pharmaceutical industries and the metal sector, also strengthened but at a less pronounced pace. Despite the supportive fiscal policy, high tariffs and structural competitive disadvantages pose challenges to these industries.
The survey showed that the eurozone economic confidence index advanced 8.7 points to 33.7 in December. In contrast, the current situation index dropped 1.2 points to -28.5.
The survey was conducted among 177 analysts between December 8 and 15.
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