Germany, ZEW expectations rise to 34.2 points as employment falls

On 18 August the ZEW economic research centre reported that Germany’s expectations index rose in August to 34.2 points, from 26.3 in July. Economists surveyed by Dow Jones Newswires had expected an increase to 30.0 points (finanzen.at; FXStreet). The primary source is the institute’s own statement, released during the day.

ZEW indicator	July	August	Consensus
Germany expectations	26.3	34.2	30.0
Germany current situation	-77.6	-61.1	—
Eurozone sentiment	23.4	31.4	25.4

What the index measures, and what it does not

The distinction between the first two rows of the table is the crux of the reading. Expectations are a survey of how the financial operators interviewed picture the coming months; the assessment of the current situation is a judgment on the present. The former stands at 34.2 points, in positive territory; the latter remains at -61.1, that is, deeply negative, even though it has improved by sixteen and a half points. An economy in which the present is judged so poorly and the future so favourably is expressing a bet, not a statement of fact.

According to ZEW president Achim Wambach, the rise in expectations is linked to good quarterly results and the recent export high. Both are references to events that have already occurred: expectations are thus built by extrapolation, on the assumption that the conditions that produced those results will hold.

The figure that points in the opposite direction

Also on 18 August, the federal statistical office Destatis reported that in the second quarter of 2026 employment in Germany stood at around 45.7 million, 212,000 fewer than in the same period of the previous year. This is a final, measured figure, not an opinion survey: and it points in the opposite direction to the optimism of the expectations index.

The two pieces of information do not formally contradict each other, since they measure different things over different horizons. But their coexistence describes precisely the condition of the German economy this quarter: an improvement anticipated by financial markets that has not yet found a counterpart in the number of people in work. In the sequence of economic cycles, employment reacts with a lag to a pickup in activity, and this lag is compatible with both readings — that of those who see in the fall in employment the tail end of the previous phase, and that of those who consider it a sign that the expected recovery will not arrive on the scale hoped for. The dossier available to us contains no elements to establish which of the two prevails, and we do not attempt to do so.

The European figure

The ZEW index on economic sentiment for the eurozone rose to 31.4 points from 23.4, above the estimate of 25.4. The improvement is therefore uniform across Germany and the area as a whole: the gap between the two indicators — 34.2 against 31.4 — remains in Germany’s favour, meaning that respondents expect Germany’s economy to follow a path no worse than the monetary union’s average, despite the negative judgment on the present situation.

A methodological caveat applies to the whole series: the ZEW survey records the expectations of analysts and financial operators, not the decisions of companies or households. A four-point deviation from consensus, as seen in August, indicates that respondents are more optimistic than forecasters had expected, not that the economy has grown by four points.

The next verifiable test will be the comparison between these judgments and the final data for the third quarter: if the expected recovery is real, it will have to show up in the employment figures, which today are down 212,000 units year on year.