German investor morale improves but challenges remain

BERLIN (Reuters) -German investor morale improved unexpectedly in June, the ZEW economic research institute said on Tuesday, while warning of persistent headwinds as export-focused sectors struggled with a weak global economy.

The institute’s economic sentiment index remained in negative territory at -8.5 points, up from -10.7 points in May. A Reuters poll had pointed to a June reading of -13.1.

“Experts do not anticipate an improvement in the economic situation during the second half of the year,” ZEW president Achim Wambach said.

The improvement came after three consecutive months of decline, and as Germany struggles with more persistent economic challenges after initially fending off a much-feared energy crunch in the winter of 2022/23.

Europe’s largest economy slipped into recession in the first quarter of this year, as spending by inflation-hit consumers failed to offset other headwinds, including the abrupt end to Russian energy imports following the Ukraine invasion.

Recent economic data added to the cloudy outlook, with an unexpected drop in industrial orders and weaker-than-forecast retail sales in April.

However, Wambach said the current recession was “generally not considered particularly alarming”.

The economic sentiment index offered a “glimmer of hope”, said Thomas Gitzel, chief economist at VP Bank.

“Possibly the worst is behind us,” he said.

ZEW said the assessment of the current economic situation in Germany worsened, falling to -56.5 points in June from -34.8 the previous month.