Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Head of Macro Analysis
Summary: Due to the holiday break, there are few important economic data releases this week with the exception of some EM central bank meetings and a bunch of European statistics. Fortunately, this morning, the German August ZEW Survey is here to provide something a bit meatier. But the news is both good and bad…
The German August ZEW Survey was one of the most important European data releases this week. It was a mixed report. The current situation assessment is slightly deteriorating again, sliding 0.4 points to land at 81.3 points, which is below consensus. On top of that, many panelists mentioned as a key concern for the coming six months the poor financial situation of the banking sector and insurers due to the prolonged period of negative interest rates and risks related to an increase in non-performing loans from Q4 2020-Q1 2021 due to the expected wave of bankruptcies following the COVID-19 recession. This is nothing new, but it will certainly contribute to influencing the panelists’ mood in the coming months.
However, there are also some encouraging signals that will probably be the main market focus this morning:
These statistics tend to point out that the pick-up in activity in Germany is not doomed to slow significantly anytime soon and that the economic comeback continues in Q3. This scenario is also corroborated by the Eurozone August ZEW Survey that was released at the same time this morning. The economic sentiment was up by 4.4 points at 64 points, marking the highest growth rate since May. That being said, we acknowledge that current process of economic normalisation is not without challenges. There is still a lot of uncertainty regarding the path of the economy in the coming months. The risk of second COVID-19 wave in Europe is not off the radar, meaning that some very localized lockdowns could be implemented here and there, and global trade, which is a key GDP driver in Germany, is probably doomed to remain gloomy at least until the end of the year, based on all the data we have gathered, especially from Asia (see here our latest analysis about global trade).
Charts: German ZEW Current Economic Situation (by Sector) and German ZEW Economic Expectations.