Economic sentiment in Germany has “increased again considerably,” as the ZEW economic sentiment index notched 9.4 points from the previous month to 71.2 points in February, according to the monthly survey among financial experts published by the Centre for European Economic Research (ZEW) on Tuesday.

“The financial market experts are optimistic about the future,” said ZEW president Achim Wambach in a statement, adding that the experts were “confident that the German economy will be back on the growth track within the next six months”. Consumption in Germany and retail trade in particular are expected to “recover significantly, accompanied by higher inflation expectations,” Wambach said. However, the current economic situation in Germany has “worsened slightly” and declined by 0.8 points compared to the previous month to minus 67.2 points, according to the ZEW index.

Meanwhile, Federal Reserve officials agreed at their most recent policy meeting that they would need to hold interest rates very low and continue bond purchases to help support the economy’s recovery from the effects of the coronavirus pandemic. The minutes of the Fed’s January 26-27 meeting showed that most policymakers were of the view that the $900 billion federal stimulus package approved by Congress in December, the likelihood of more fiscal support and continued distribution of COVID-19 vaccines “would lead to a sizable boost in economic activity” this year. Still, they noted “the pandemic continued to pose considerable risks to the economic outlook”.

Finally, the eurozone economy contracted at a slightly slower pace than initially estimated in the fourth quarter amid COVID-19 control measures, the flash estimate published by Eurostat showed on Tuesday.  The EU’s statistics office said that gross domestic product (GDP) in the 19 countries sharing the euro contracted by 0.6 per cent quarter-on-quarter in the October-December period, for a five per cent annual decline. That is slightly better than an earlier Eurostat estimate of a contraction of 0.7 per cent in the quarter and 5.1 per cent in annual terms.

The statistical office also revised economic contraction for the EU to 0.4 per cent from the previous 0.5 per cent, while the annual rate was confirmed at minus 4.8 per cent.

The article was prepared by Bank of Valletta plc for general information purposes only.