ZEW Index – March 2022

Such a sharp shift in sentiment among German financiers has not been recorded in the more than 30-year history of the ZEW index. As a result of the sanctions imposed on Russia, more than half of the respondents expect a deterioration of the economic situation in Germany.

In March, the ZEW index fell by an unprecedented 93.6 points to -39.3 points. In this way, the record was definitely broken two years ago, when the ZEW index fell by 58.2 points in reaction to the ZEW index of the Covid closing in March 2020. The index itself was also at its lowest level in two years.

The ZEW index is the difference between the proportion of respondents who think that the economic situation in Germany will improve over the next six months and the proportion of respondents who think it will deteriorate. The March reading caused a flurry of pessimism regarding concerns about the impact of sanctions on Russia on Europe’s largest economy. In the March poll As many as 58.9% of experts surveyed expect the economic downturn in Germany In the next six months. That’s 48.2 points. Percentage more than in February.

For the same reasons, expectations of the highest inflation in decades have increased. The pace of price growth in Germany is expected to accelerate by 77.2% of respondents (up 59.7 percentage points compared to February). As a result, nearly half of experts expect short-term interest rates to rise in the eurozone, and nearly 90% expect them to rise in the United States. Collectively, higher long-term interest rates (ie 10-year government bond yields) are also expected in Germany (78.4%) and the United States (83.4%).

The monthly ZEW survey is based on responses from nearly two hundred German financial experts. Analysts are asked about their forecast for the next six months. There are only three possible answers: it will increase / improve, it will remain the same, and it will decrease / deteriorate. The last poll was conducted from March 7 to 14, two weeks after the hostilities in Ukraine.

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