German economy: Trump and traffic light shutdown weigh on ZEW economic expectations

Donald Trump’s election victory and the break of the traffic light coalition are weighing on the economic prospects for Germany. The economic expectations of German financial experts unexpectedly deteriorated in November. The mood barometer from the Mannheim Center for European Economic Research (ZEW) fell by 5.7 points to 7.4 points compared to the previous month. Analysts on average had expected a slight increase to 13.2 points.

ZEW President Achim Wambach said that economic expectations were under the influence of Donald Trump and the traffic lights being turned off. “Expectations are falling in the current survey, although this is likely to be due in particular to the outcome of the US presidential election.” However, Wambach also sees hope: “In the last days of the survey period, more optimistic voices about the economic outlook for Germany increased due to the prospect of early elections.”

The already very low assessment of the economic situation deteriorated further in November. The corresponding value fell by 4.5 points to minus 91.4 points. Economists had expected an increase to minus 85.0 points.

Barometer far from historical average

At 7.4 points, the barometer is far away from the historical average of 21 points, said Christoph Swonke, economic analyst at DZ Bank. The impending political deadlock in Germany is causing uncertainty. “In addition, the prospects of US import tariffs from the new American government under Donald Trump are weighing on us.” After all, new elections could take place at the end of February “and thus a return to political ability to act”.

The ZEW survey for November confirms that the improvement in economic expectations from October should be viewed with caution, said Robin Winkler, chief Germany economist at Deutsche Bank. “However, the survey was conducted last week, i.e. at a time of great political uncertainty in the United States and Germany.”