Investors confident of German economic upturn by September - ZEWInvestors confident of German economic upturn by September - ZEW
FILE PHOTO: VW re-starts Europe’s largest car factory after coronavirus shutdown

By Joseph Nasr

BERLIN (Reuters) – Investors are confident the worst of Germany’s sharp economic downturn linked to the coronavirus pandemic will be over by the end of the summer, a survey showed on Tuesday.

The ZEW research institute said its monthly survey showed investor sentiment rose to 63.4 in June from 51.0 in May. Economists had expected a reading of 60.0.

“There is growing confidence that the economy will bottom out by (the end of) summer 2020,” ZEW President Achim Wambach said in a statement.

A robust health care system and widespread testing has helped Germany record fewer fatalities linked to COVID-19 than many other European countries.

The government has approved two huge rescue packages for the economy, which has also been helped to withstand the impact of the epidemic better than neighbours like France, Britain and Italy by a decision to allow factories and construction sites to remain open thoughout Germany’s lockdown.

Even so, Europe’s largest economy is facing its worst recession since World War Two, with the government predicting in April that gross domestic product would shrink 6.3% this year.

Wambach said the anticipated pick-up in activity after the summer would vary from sector to sector.

“Earnings expectations are strongly negative for export-oriented sectors such as automotive and mechanical engineering, as well as the financial sector,” he said.

“In contrast, forecasts are fairly positive for information technologies, telecommunications and consumer-oriented services.”

Thomas Gitzel, chief economist at VP Bank, linked the improvement in investor confidence to the gradual lifting of lockdown measures starting at the end of April.

“Undoubtedly the next months will see considerable gains in economic data… The comparative basis is so low that even the slightest improvement will translate into big growth rates.”

Data for April, which coincided with the lockdown, showed that industrial orders, production and exports all posted record contractions.

Those “dreadful” readings “should have marked the trough of the crisis”, said ING’s chief economist for the euro zone, Carsten Brzeski, adding that the economic rebound should continue well into the second half of 2020.

A separate ZEW gauge measuring investors’ assessment of the economy’s current conditions rose to -83.1 in June from -93.5 in May. Analysts had forecast a reading of -84.0.

(Reporting by Joseph Nasr; Editing by Michelle Martin and John Stonestreet)