German Investor Confidence Surges 10.9% in July Amid US Tariff Threats

German investors have shown renewed confidence in the country’s economy in July, demonstrating resilience against US tariff threats as the Berlin government continues to push forward with spending plans. This optimism is reflected in the significant surge of the expectations index, which rose to 52.7 from 47.5 in June, surpassing the 50.4 predicted by economists. Additionally, a gauge of current conditions has also increased, indicating a positive outlook for the economy.

Germany’s economy experienced a boom in the first three months of the year, driven by a surge in demand as companies rushed to protect themselves from impending US tariffs. Achim Wambach, president of the ZEW and a professor of economics at the University of Mannheim, noted that respondents have a positive attitude towards the economic outlook. He attributed this shift in morale to the anticipated resolution of the US-EU trade war and potential financial support from the German government’s next investment plan.

However, analysts estimate that growth may have slowed in the second quarter as the initial wave of orders fades. The threat of 30% tariffs on the EU by US President Donald Trump has added to the economic uncertainty, with Chancellor Friedrich Merz expressing concern that this would disproportionately affect German exporters. Despite these uncertainties, almost two-thirds of experts expect the German economy to recover, as indicated by Wambach. The survey, released on July 14, did not capture the most recent US developments.

Industrial production in the 20-nation euro zone rose by 1.7% from May to June, higher than analysts expected, indicating that the nation is coping well with the impact of tariffs. The country’s first estimate of gross domestic product (GDP) is due on July 30, which will provide further evidence of the state of the economy.

Despite the volatility in production levels and company order volumes, German investors maintain faith in the country’s economic development. This confidence has not been seen for several years, as per surveys conducted by sources. The federal minister for economy and energy in Germany, Katherina Reiche, cautioned that the German economy may fail to pick up significantly in the second three months of the year. However, economists are more optimistic about the country’s prospects, with some forecasting a 0.2% growth this year, rather than the stagnation previously projected. A 1.1% and 1.7% expansion is expected to be reached in 2026 and 2027, respectively, as the substantial ramp-ups of government outlays on infrastructure and defense kick in. Dennis Huchzermeier, a senior economist at the Handelsblatt Research Institute, noted that some parts of the new federal government emergency program are encouraging.