The mood among financial market professionals is brightening. They expect the inflation rate to continue to fall. Because the situation on the energy markets is also easing, the outlook for the economy is improving.
Stock market professionals are more optimistic about the German economy than they have been since the start of the Russian war against Ukraine because inflation concerns are easing. The barometer for their assessment of the economy in the next six months rose by an unexpectedly strong 13.4 points to minus 23.3 points in December and thus for the third month in a row, according to the Mannheim Center for European Economic Research (ZEW) in its monthly survey of 180 analysts and investors.
This is the highest value since February: At that time, the barometer was still well up at 54 points. Economists had only expected an increase to minus 26.4. The stock market traders also rated the current situation better. “A large majority of the financial market experts assume that the inflation rate will decrease in the coming months,” said ZEW President Achim Wambach, explaining the positive trend. “Together with the temporary relaxation on the energy markets, this leads to a clear improvement in the economic outlook.”
Most experts – from the Bundesbank to the leading institutes – still expect a recession in the winter months. The brightening of important leading indicators for the economy does not mean that the recession will not come, said the chief economist at VP Bank, Thomas Gitzel. “But the economic contraction is likely to be milder and shorter than originally expected.” Thanks to well-stocked gas storage facilities, the German economy is unlikely to collapse, said analyst Jörg Angele from asset manager Bantleon, adding: “Nevertheless, it cannot avoid a recession.”
The inflation rate was 10.4 percent in October, the highest since 1951, but fell to 10.0 percent in November. “The gas and electricity price brake should further stabilize this trend in the coming year,” said economic analyst Christoph Swonke from DZ Bank.
The European Central Bank (ECB) is braving itself with mammoth interest rate hikes against inflation, which is rushing from record to record in the entire euro area, which could also impede the economy due to more expensive loans. Economists expect the key interest rate to be raised from 2.00 to 2.50 percent this Thursday. “There is no reason for the ECB to prematurely move away from the interest rate hike path,” said Helaba economist Ulrich Wortberg. “The pace of the steps should, however, decrease.”
