The ZEW index fell 6.6 points to 28.1 in October
By Ed Frankl
Investor sentiment in Germany slipped in October for the first time since April, as high energy prices driven by the war in the Middle East continue to squeeze households and business.
The ZEW Indicator of Economic Sentiment for Germany -- which tracked the expectations of 178 analysts and investors at banks, insurance companies and other businesses -- fell 6.6 points to 28.1 in October. That was a little weaker than expectations from economists polled by The Wall Street Journal of a decline to 29.9.
While the German economy is slowly emerging from the stagnation of recent years, that recovery isn't yet self-sustaining, ZEW President Achim Wambach said. The ZEW index had risen consistently through the summer after tumbling following the first U.S.-Israeli attacks on Iran.
"Private consumption and investment remain weak because of high energy prices: they put real incomes under pressure, increase production costs and keep inflation higher for longer," he noted.
The soaring bond spreads in France, as well as domestic political uncertainty, could also have led investor expectations to wobble this month, Pantheon Macroeconomics' Claus Vistesen said in a note to clients.
Chancellor Friedrich Merz's leadership has come under fire since the far-right Alternative for Germany party topped two regional elections in September.
Nevertheless, the German economy is expected to accelerate this year, helped by stronger-than-expected exports and the government's fiscal stimulus that is plowing investment into defense and infrastructure improvements. The International Monetary Fund last week forecast Germany's full-year growth in 2026 at 1.3%, from just 0.2% last year.
However, inflation continues to climb in Europe's largest economy, as energy prices remain elevated with no end in sight to hostilities in the Gulf region. The European Central Bank raised its key rate for a second time in 2026 last month, and is expected to do so again before the end of the year.