German economic sentiment improves in August as EU-US tensions ease

German economic sentiment improved in August as trade tensions between the EU and the US eased, according to the latest survey from the ZEW Center for European Economic Research in Mannheim.

The economic sentiment indicator rose to -13.7 from -24.7 in July, above consensus expectations for a reading of -21.3. However it remained in negative territory and significantly below its long-term average of 23.0.

Meanwhile, the current situation index nudged up by 0.2 points to 72.6, beating expectations for a reading of 72.3.

Achim Wambach, President of ZEW, said: "The recent agreement in the trade dispute between the EU and the United States has led to a considerable rise in expectations for Germany and also, to a lesser degree, for theeEurozone. However, the economic outlook for Germany is now significantly less favourable than it was six months ago."

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the rebound in the ZEW investor sentiment index is welcome news following a string of declines in recent months.

"The increase is consistent with EZ investors probably being too pessimistic at the end of Q2, but most recent events in Turkey and the spectre of further volatility in Italian bond markets over the forthcoming budget negotiations suggest that sentiment will remain downbeat in the near term. The detailed indices show that headline inflation and interest rate expectations fell slightly, while the outlook for the main EZ stock indices improved, albeit marginally," he said.