German investor morale improves unexpectedly in May, but 'no fresh start' in sight
German Investor Sentiment and Economic Outlook
By Friederike Heine
BERLIN, May 12 (Reuters) - German investor morale unexpectedly improved in May, although it remained in negative territory overall as businesses continue to feel the economic consequences of the Iran war, the ZEW economic research institute said on Tuesday.
Investor Morale and ZEW Indicator
After two consecutive months of strong declines in economic expectations, the indicator rose unexpectedly to minus 10.2 points in May from last month's minus 17.2. Analysts polled by Reuters had expected the reading to fall to minus 19.8 points.
Expert Commentary
"Financial market experts are hoping that the Iran war will end soon. Nevertheless, weak industrial production, rising energy prices and an inflation rate that exceeds the 2% mark continue to burden the German economy," said ZEW president Achim Wambach.
No Fresh Start for the German Economy
Current Economic Situation
NO FRESH START
ZEW's assessment of the current economic situation slightly deteriorated in May, with the indicator falling by 4.1 points in line with expectations to reach minus 77.8.
Ongoing Impact of the Iran War
"This is no fresh start - the ongoing war in Iran continues to weigh heavily on the mood," said Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe Privatbank.
"The confrontation has already dragged on too long to simply reset the clock once the war ends," he added.
Energy Prices and Economic Struggles
The spike in oil and gas prices following the start of joint U.S.-Israeli strikes on Iran on February 28 has added to the struggles of Europe's largest economy as it tries to regain momentum in the long wake of the COVID pandemic.
The government has already halved its 2026 growth forecast to just 0.5%, citing the impact of the Iran crisis.
Inflation and Unemployment Trends
German EU-harmonised inflation rose to 2.9% in April, driven by a 10.1% year-on-year spike in energy prices, while the number of unemployed people in Germany rose above the politically sensitive 3 million mark in April.
(Reporting by Linda Pasquini and Friederike Heine; Editing by Matthias Williams and Hugh Lawson)
