German economic confidence weakened unexpectedly in February after a strong rebound at the start of the year, the financial market survey conducted by the think tank ZEW showed Tuesday.
The ZEW indicator of economic sentiment dropped to 58.3 in February from 59.6 in January, which was the highest since July 2021. The score was forecast to rise further to 65.2.
On the other hand, the assessment of the current economic situation continued to improve, with the corresponding index climbing to -65.9 from -72.7 in the prior month. The expected reading was -65.7.
“The ZEW Indicator remains stable,” ZEW President Achim Wambach said. “The German economy has entered a phase of recovery, albeit a fragile one,” the president added.
Further, he observed that there are still considerable structural challenges, especially for industry and private investment. The impending reforms of the system of social insurances should be used to significantly enhance Germany’s attractiveness as a business location, said Wambach.
In February, the export-oriented sectors showed moderate to strong improvements. Prospects particularly improved for the chemical and pharmaceutical industries, steel and metal production and mechanical engineering.
The survey showed that prospects for private spending are improving despite continuing uncertainty. However, banks and insurance and the information technology sector showed negative development.
Economic confidence in the euro area as a whole also weakened in February. The corresponding index fell to 39.4 from 40.8 in January. Meanwhile, the current situation index rose to -13.6 from -18.1 in the previous month.
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