German economic sentiment strengthened at the beginning of the year to the highest level in four-and-a-half years, the financial market survey conducted by the think tank ZEW showed Tuesday.
The economic sentiment index rose to 59.6 in January from 45.8 in the previous month, reaching the highest since last July 2021. The expected score was 50.0.
The assessment of the current economic situation also improved, with the corresponding index rising to -72.7 from -81.0 in December.
The ZEW Index is rising strongly, and 2026 could mark a turning point, ZEW President Achim Wambach said.
“However, despite the positive economic sentiment, work should continue to strengthen the attractiveness of the location in order to enable sustainable growth.”
Despite the announcement of additional tariffs by the US last weekend, the export-oriented industries are showing significant improvements, especially steel and industry as well as mechanical engineering, the survey said.
Additionally, the Mercosur agreement is likely to have improved the outlook for export-intensive industries, although the unpredictable US trade policy continues to be an additional burden on the German export economy.
The survey showed that the eurozone economic confidence index advanced 7.1 points to 40.8 in January. Similarly, the current situation index rose to -18.1 from -28.5.
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