October 21, 2026
Investor sentiment in Germany ended a five-month streak of improvement, after falling more than expected during the month of October, affected by the pressures imposed by high energy prices on private consumption and investment, according to data issued by the ZEW Institute for Economic Research on Tuesday.
The data showed that the index decreased to 28.1 points, compared to 34.7 points in the previous month, while the decline was lower than the expectations of analysts in a Reuters poll, who expected it to decline to 30 points. These results were based on the responses of 178 analysts and institutional investors who participated in the survey during the period from October 12 to 19.
The head of the institute, Achim Wambach, explained that private consumption and investment are still weak due to high energy prices, which put pressure on real incomes, raise production costs, and keep inflation rates high for a longer period. He pointed out that the economy is gradually emerging from recession, but its recovery still lacks the elements of self-sustainability.
In the same context, the Federal Statistical Office announced on Tuesday that producer prices in Germany recorded their fastest rise in three and a half years in September, driven by an increase in energy prices resulting from the Iranian war. High oil and natural gas prices slowed the recovery in the largest European economy.
On the other hand, the index, which measures investors’ assessment of the current economic situation, recorded an improvement beyond expectations, rising to negative 35.9 points, compared to negative 47.1 points in September. The German Ministry of Economy stated earlier this month that the Iranian war did not negatively affect the economy to the extent that had been feared, while raising its growth expectations for the current year and next.
Thomas Getzel, chief economist at VP Bank, said that the industry will initially be able to increase its production thanks to the high level of accumulated orders, which is explained by the improved economic outlook. He pointed out that the German economy, which grew by 0.3 percent in the second quarter, had a performance that exceeded expectations in the first half of the year, supporting 2026 growth, pointing out that the ZEW survey does not reflect significant new momentum for the last three months of the year, after the economy likely achieved limited progress in the third quarter.
On the political level, the ruling coalition in Germany is facing increasing pressure with the rise of the far-right Alternative for Germany party, whose successes in the regional elections raised concerns among the main parties and revealed tensions within the coalition, which were exacerbated by the resignation of Labor Minister Barbel Bass last week and the uncertainty it created.
Felicitas Hinze, an economist at Deutsche Bank Research, said that recent political developments may have increased uncertainty about the rapid implementation of the reform plans announced over the summer.
