German economic sentiment rebounds in May as tariff fears ease #NewsGerman

Germany’s economic sentiment staged a strong rebound in May, recovering from its lowest levels in over two years, as easing trade tensions and political stability lifted the business outlook.

According to the latest ZEW Economic Sentiment survey, the indicator rose to 25.2 points, up from minus 14 in April which was the weakest reading since July 2023.

The recovery far outpaced analysts’ expectations of 11.9, reflecting renewed confidence across key sectors.

“Expectations are brightening,” ZEW President, Professor Achim Wambach, PhD, said, noting that the formation of the new federal government, the progress in the tariff disputes, and a stabilising inflation rate are contributing to the increased optimism.

The eurozone saw a similarly strong recovery, with sentiment climbing to 11.6 points in May from minus 18.5 in April, well above expectations of minus 3.5. The current economic assessment for the monetary union also improved, rising 8.5 points to minus 42.4. Despite this upbeat forward-looking sentiment, Germany’s current economic conditions remain grim, with the corresponding index dipping a further 0.8 points to minus 82.0 — among the lowest levels in recent years.

The ZEW survey highlighted growing optimism for the next six months, citing improvements in banking, automotive, chemical, metal, machinery and steel industries.

Stabilising inflation, a more predictable trade environment, and hopes for further interest rate cuts by the European Central Bank are fuelling expectations of a broader recovery.

A rebound in domestic demand and a revival in the construction sector are also anticipated, offering a more balanced growth outlook after months of stagnation.

German stocks showed only modest gains on Tuesday, as the DAX index rose 0.2% to 23,600. A day earlier, the leading German stock market index opened at over 23,900 points, setting new record highs, buoyed by optimism over a US-China trade truce.

Among top movers, Bayer rose 8.5% after beating earnings expectations for the first quarter. The German pharmaceutical giant posted a 7.4% decline in adjusted EBITDA to €4.09 billion, but the figure surpassed analyst forecasts thanks to strong demand for new prescription drugs, which helped offset weakness in its crop science division. The company confirmed its full-year outlook and continued with a cost-cutting programme that included 2,000 job reductions in the first three months of the year.

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