The ZEW economic expectations drop significantly in October from 77.4 to 56.1. The decline is stronger than the consensus forecast. The second wave, which is gaining in intensity, is now also clouding the economic outlook. The financial market analysts surveyed by ZEW rate the economic future as less good compared to the previous month. The increasing number of infections in Germany, but especially in neighboring European countries, alarms the augurs.
But the uncertainty about how things will continue after the US presidential election may have played a role, at least in passing. If the incumbent US President Donald Trump speaks of “electoral fraud” in the event of a narrow election victory for the challenger Joe Biden, this could lead to unrest and a lengthy game. This scenario is quite conceivable and leads financial market analysts to worry lines.
We mustn’t kid ourselves that the increasing number of new infections will have economic consequences. This doesn’t even require a lockdown. Consumer behavior is changing. Restaurant visits are avoided, retail stores are less frequent and the weekend trip to the museum is postponed. It is not surprising that in such an environment the investment mood of companies is not particularly pronounced.
It is becoming increasingly clear that the autumn and winter months will be difficult for the German economy. After the brilliant economic catch-up in the third quarter, there is now sadness in many places. The jobs that remained during the lockdown have been processed, and new ones are urgently needed to keep production going. Economically challenging months lie ahead of the German economy.
The risk of an economic setback at the end of the year increases. This does not mean that a massive slump in growth is imminent, but a slight decline in gross domestic product cannot be ruled out.
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