Sentiment brightens in the U.S., darkens in Europe
In stark contrast to the mood in the US, economic sentiment in Europe, as tracked by the Mannheim-based ZEW (Leibnitz-Zentrum für Europäische
The ZEW Indicator of Economic Sentiment is based on the ZEW Financial Market Test, interviews with up to 300 experts from banks, insurance companies and financial departments of selected corporations. The select group of experts are asked about their assessments and forecasts for important international financial market data every month since 1991. Participants are asked about their six-months expectations concerning the economy, inflation rates, interest rates, stock markets and currency rates. ZEW's most recent survey, for the current month concluded as follows:
“Economic expectations for Germany have been overshadowed by Trump’s victory and the collapse of the German government coalition. In the current survey, economic sentiment has declined – and the outcome of the US presidential election is likely to be the main reason for this. The fact that economic expectations for the USA are clearly rising, while economic sentiment for China and the eurozone is falling, supports this view."
In terms of concrete figures, we had the following results:
- ZEW's Current Situation Index dropped from -86.9 in October to -91.4 in November. The consensus expectation was a much less pessimistic -86.
- For the Eurozone, the ZEW Economic Sentiment Index dropped from 20.1 for October to 12.5 today. The expected figure was 205.
- German ZEW Economic Sentiment Index also dropped precipitously, from 13.1 reported in October to 7.4 vs. the expected level was 12.8.
In all, the sentiment dimmed quite sharply and significantly more than expected at the same time when US sentiment suddenly brightened. Over the last few days, the capital markets confirmed these views with sharp declines of the euro, British pound and yen against the US dollar. It remains to be seen whether these trends will continue, or will we see further unexpected surprises over the coming weeks.
ZEW President Achim Wambach tried to put a touch of positive spin on this last report by asserting that the economic prospects for Germany could "improve with snap elections on the horizon. Overall, what we're currently observing is a very dynamic development of economic expectations." How exactly the snap elections could improve Germany's economic prospects may only be clear to Professor Wambach, but it's all about them dynamic developments in economic expectations and the word salads we can toss with big words and empty platitudes.
The German ruling establishment is now maneuvering to delay the elections under various excuses. The real reason to delay, I believe, is to give themselves time to ban the AfD party. If they manage to do this, the elections will only further dim the sentiment and add to social tensions in 2025.
Alex Krainer – @NakedHedgie is the creator of I-System Trend Following and publisher of daily TrendCompass investor reports which cover over 200 financial and commodities markets. Today we launched TrendCompass on Substack: free through November, sub $50/month in 2025! Check it out here: https://trendcompass.substack.com/about
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