German ZEW indicator for economic sentiment likely dropped in February on continuous market turbulence

The upcoming German ZEW investor economic sentiment indicator for February is expected to have moved downward from 10.2 to -1 due to persistent market turbulence, with a rising focus on euro area banks. A big correction was already expected in January; however, it turned out to have been unexpectedly small. The increase in the assessment of current scenario was mainly noteworthy.

A certain amount of resilience is expected in the assessment of current scenario in February; however, both the indicators this time will move lower. The increasing focus on European factors implies that the current bout of uncertainty might last longer, impacting the other confidence indicators and hence likely affecting the growth outlook of Germany.

The household consumption is still expected to be the main growth driver of Germany, but investment might weaken again at the beginning of 2016. Meanwhile, headwinds to net trade might be bolstered by the weakness in the US.