German economic sentiment recovers in May on stabilizing inflation, easing tariff disputes

ISTANBUL

Economic sentiment in Germany showed significant improvement in May, after sinking to its lowest level in two years in the previous month due to tariffs, according to data released Tuesday by the Leibniz Centre for European Economic Research (ZEW).

The ZEW Indicator of Economic Sentiment for Germany soared 39.2 points from a month ago to 25.2 in May, marking its strongest monthly rise since January 2023.

The figure, which exceeded expectations of 10.7 points, signaled growing optimism among financial market experts about the country’s economic future.

"Expectations are brightening. The ZEW indicator sees a major improvement in May 2025 and compensates for part of the losses observed in the April survey," said ZEW President Achim Wambach.

"With a new government in place, some progress in the tariff disputes and a stabilizing inflation rate, optimism has increased,” he added.

The most recent interest rate cut by the ECB and anticipated future rate cuts have a positive effect, particularly for the construction industry, the statement added.

Meanwhile, the assessment of Germany's current economic situation showed a slight decline, falling 0.8 points to minus 82.

Economic sentiment in the eurozone mirrored Germany’s upward trend, with the ZEW indicator for the bloc surging 30.1 points to 11.6.

The evaluation of the current economic situation in the eurozone saw an improvement, rising 8.5 points to minus 42.4.