Time for the German ZEW economic sentiment to turn up

In November, the ZEW investor economic sentiment indicator is expected to have increased from 1.9 to 8.4, following a spell of seven consecutive months of decline. This primarily reflects the better mood in stock markets of late, with hints of further ECB action in December. 

"We expect the forward looking expectations component to stage the biggest comeback, while the assessment of current conditions should also improve, remaining firmly above its long-term average", notes Societe Generale. 

The ZEW has been declining more significantly in recent months than other forward-looking indicators, likely due to greater investor concerns over the outlook for global demand, whereas company responses have reflected resilient domestic demand to a greater extent. With subdued external conditions and the VW effect still expected in Q4 data, there is however a high risk that also the PMIs and the Ifo will weaken somewhat in the coming months.