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Article / 13 September 2016 at 5:00 GMT

3 Numbers: German sentiment on track to rise for second month

editor/analyst /
United States
  • ZEW economic sentiment data for Germany expected to post second monthly gain 
  • Will sentiment across the Eurozone similarly bounce back after Brexit-vote shock? 
  • US small-business optimism to post a slight gain

By James Picerno

Tuesday brings several updates of economic sentiment. ZEW data offers an early read for September on the mood in Germany and across the Eurozone. Later we’ll see the August report on US sentiment in the small-business sector.

Germany: ZEW Economic Sentiment (0900 GMT) The Economy Ministry projects a softer growth rate for Europe’s biggest economy. “The upturn in the German economy remains solid but the pace of growth will be lower in the second half of this year than in the first half,” the ministry advised on Monday in its monthly report.

The crowd will be eager to learn if the August rebound in German sentiment
will continue in September. Photo: iStock

The forecast isn’t terribly surprising once you consider that the broad trend for Germany has already posted a slower pace of growth in the second quarter. GDP output slipped to a 0.4% quarterly gain in Q2, down from 0.7% in Q1, according to Eurostat.

Meanwhile, today’s sentiment update from ZEW will offer an early read on September’s macro profile. The crowd will be eager to learn if the August rebound will continue in September. ZEW's expectations data was especially hard hit in July — the index fell to its lowest reading in nearly four years. The subsequent bounce in August is widely considered a partial recovery to the initial shock that weighed on the July reading after the UK’s decision in June to leave the European Union.

Today’s question: Will the post-Brexit shock continue to fade? Yes, according to the consensus forecast.’s polling of economists sees ZEW’s expectations data rising for a second month, to 2.5. The current conditions data is on track to increase as well, according to analysts.

Eurozone: ZEW Economic Sentiment (0900 GMT) Today’s ZEW update on sentiment includes figures for the Eurozone as well. As with Germany, the key issue is whether the post-Brexit August bounce also has legs for Europe.

Although the near-term outlook for euro area growth is still weak, the sharp slide in the August ZEW sentiment index looks excessive, based on the latest survey numbers from IHS Markit. “The Eurozone economy continued to expand at a broadly steady pace in August,” the data analytics firm advised last week in the update of the Eurozone Composite PMI. “The rate of increase edged down to a 19-month low, however, mainly due to a weaker rate of expansion in Germany.”

Meantime, Now-casting’s weekly forecast for Eurozone GDP growth in the third quarter ticked higher for the first time in three weeks to a projected quarterly rise of 0.24%. Although that’s down from Q2’s 0.3% pace, Now-casting’s weekly estimates for Q3 have recently stabilised in the 0.2%-plus range. That’s still a sluggish advance, but the deterioration in third-quarter forecasts that unfolded in the summer may have run its course.

Another rise in today’s September sentiment reading for the Eurozone via ZEW would provide fresh support for expecting that the worst-case projection for third-quarter GDP will be a gain that's more than 0.2%.

US: NFIB Small Business Optimism Index (1000 GMT) Analysts are looking for another incremental increase in the sentiment benchmark for the US small-business community for August. But the ongoing slowdown in job growth for small companies raises doubts.

ADP’s estimate of payrolls for companies with fewer than 50 employees dipped for the second time in August. The monthly increase of nearly 63,000 is the softest gain in nearly a year.

“Uncertainty is high, expectations for better business conditions are low, and future business investments look weak,” said the chief economist at National Federation of Independent Business (NFIB), the group that publishes the sentiment numbers for small firms, in the July report. “Our data indicates that there is little hope for a surge in the small business sector anytime soon.”

The sliding rate of job growth doesn't offer a reason to argue that the outlook has changed for August. Nonetheless,’s consensus forecast sees a marginal increase for today’s update. Maybe so, but with a downside bias weighing on job growth for small firms, any strength in sentiment will likely be slight.

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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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