“The great euphoria seems to have evaporated”

Experts from banks, insurance companies and finance departments have lowered their economic expectations significantly. The reason is not only the increasing number of corona infections.

Bull and bear are above the Dax lettering in the Frankfurt Stock Exchange

AIn view of the rising number of corona infections, the economic expectations of financial experts, which had risen in recent months, suffered a significant setback in October. The Center for European Economic Research (ZEW) said on Tuesday that expectations had fallen “very strongly”. The ZEW index for economic expectations was at 56.1 points, 21.3 points below the previous month’s value.

“ZEW’s economic expectations are still very clearly positive,” said ZEW President Achim Wambach. “The great euphoria of August and September seems to have passed,” he added. “The recent sharp rise in the number of corona infections is increasing the uncertainty about further economic development.” In addition, there is the prospect of a Brexit without a trade agreement between the EU and Great Britain. The current situation before the presidential elections in America is also increasing uncertainty.

Economically demanding months

Every month, ZEW surveys around 200 experts from banks, insurance companies and finance departments of large companies about their current assessments and forecasts of important international financial market data such as inflation rates, interest rates, stock indices, exchange rates and the oil price. The responses of 171 analysts and institutional investors were evaluated for the October survey. In September the ZEW index had reached its highest level in more than 20 years; in August, too, it had grown significantly.

Michael Holstein, economic expert at DZ BANK, emphasized that the decline in the ZEW barometer represents the sharpest decline since the crash in March. “It is now important that the European governments find concepts to get the infection process under control again without a new, general lockdown. This is the only way to avoid another economic recession, ”he says.

“The risk of an economic setback at the end of the year is growing. This does not mean that a massive slump in growth is imminent, but a slight decline in gross domestic product cannot be ruled out, ”says Thomas Gitzel, chief economist at VP Bank. The orders that remained during the lockdown have been processed, and new ones are urgently needed to keep production going. Economically demanding months lay ahead of the German economy.