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Article / 22 August 2017 at 4:54 GMT

3 Numbers: A mild dip expected for Germany’s ZEW survey

editor/analyst /
United States
  • Analysts are looking for softer readings in Germany’s ZEW survey for August 
  • The diesel emissions scandal poses a threat to Germany's reputation for quality
  • The UK CBI Industrial Trends Orders Index is headed for a second monthly drop
  • Another regional Fed manufacturing index is on track to post a positive reading

By James Picerno

The pace of economic releases picks up a bit for Tuesday, including the August update of Germany’s ZEW Economic Survey. Later, we’ll see some early numbers for August via the UK’s CBI Industrial Trends Orders Index and the US Richmond Fed Manufacturing Index.

Germany: ZEW Economic Survey (0900 GMT) There’s always something to worry about when looking ahead, and Europe’s top-performing economy is no exception. 

 The diesel emissions crisis 'must be classified as a new risk [to the economy], even though its effects cannot be estimated', said the German financial ministry. Photo: Shutterstock

The latest concern is the "diesel crisis", which began two years ago when Volkswagen was snared in an emissions scandal. At stake is the country’s reputation for high-quality auto and industrial exports, which are key drivers of Germany’s economy.

The country’s financial ministry highlighted the potential for fallout, noting in the agency’s monthly report that “the so-called diesel crisis must be classified as a new risk [to the economy], even though its effects cannot be estimated at present.”

If there’s trouble brewing, it’s not expected to show up in today’s survey data for August.’s consensus forecast sees ZEW’s current conditions index slipping to 85.0 from 86.4 in July, although that still leaves the benchmark close to a six-year high.

The expectations benchmark, however, is on track to fall to 13.3, a five-month low, hinting at the potential for a bit more turbulence in this year’s second half. Nonetheless, a 13-plus reading is still relatively elevated compared with recent lows.

Meantime, the hard data for the rear-view mirror still looks encouraging. Economic growth remained robust in last week’s GDP report for the second quarter. "The German economy is proving its staying power, the upswing continues," said an economist at Bankhaus Lampe.

It’s anyone’s guess how much of a threat the diesel crisis poses in the months ahead, but for the moment the broad trend is strong and today’s sentiment data isn't expected to materially change the generally upbeat outlook.

UK: CBI Industrial Trends Orders Survey (1000 GMT) How much economic risk is bound up with the UK’s planned departure from the European Union? Quite a bit less if the government engineers a so-called hard Brexit, according to a provocative new report from Economists for Free Trade, a group led by Cardiff University economics Professor Patrick Minford.

The pro-Brexit faction recommends eliminating all trade barriers and tariffs, a unilateral act that would give the UK economy an annual £135 billion boost, according to supporters of the strategy.

“‘Hard Brexit’ is good for the UK economically while ‘soft Brexit’ leaves us as badly off as before,” advised Minford.

Many economists disagree, although pro-Brexit analysts point to the economy’s resilience in the wake of last year’s referendum to take Britain out of the EU. Today’s August survey data for the industrial sector is expected to provide new evidence that economic activity remains moderately robust in the second quarter.

The CBI Industrial Trends Orders Index is on track to dip to 9 for this month, down from 10 in July. But if analysts are right, today’s update will show that sentiment remains close to the three-decade high of 16 that was reached in June.

US: Richmond Fed Manufacturing Index (1400 GMT) The early clues for US manufacturing activity in August look encouraging in the wake of last week’s updates for two regional Fed benchmarks. Today’s release from the Richmond Fed is expected to make it three in a row for thinking positively at the midpoint for the third quarter.’s consensus forecast sees the mid-Atlantic benchmark for the country's manufacturing sector slipping to 11 in August from 14 in July. That’s still a solidly positive reading. If the forecast is accurate, the upbeat report will add to bullish figures in last week’s August results from the New York and Philadelphia Fed banks.

Today’s update will also offer more context for anticipating tomorrow’s flash August data for the US Manufacturing PMI, which tracks the national trend. In the July update, the PMI edged up to a four-month high of 53.3, which is moderately above the neutral 50 mark.

“The second half of the year got off to a good start for US manufacturers,” the chief business economist at IHS Markit noted earlier this month.

Today’s release is expected to keep the positive outlook spinning for the manufacturing sector in the third quarter.

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– Edited by Susan McDonald

James Picerno is a macro analyst/editor at Follow James or post your comment below to engage with Saxo Bank's social trading platform.


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