German economic expectations fall to 28.1 points in October despite improvement in current conditions
Key Facts
The ZEW indicator of German economic expectations fell to 28.1 points in October 2026, missing forecasts as energy pressures continued to weigh on private consumption and investment. The survey result released on October 20 showed the index declining from September's 34.7 points, according to Investing.com's calendar. Forecasts published in the calendar had pointed to 30.2 points, leaving the actual reading below both expectations and the previous month's level. By contrast, the institute reported an improvement in the assessment of current economic conditions, with respondents' views of the present situation moving in the opposite direction to their expectations. The divergence came as ZEW President Achim Wambach described Germany's recovery as not self-sustaining, with the economy gradually beginning to emerge from stagnation.
The indicator assessing current economic conditions in Germany stood at minus 35.9 points in October, up 11.2 points from the previous month, according to the institute's statement. The current assessment thus remained in negative territory despite the monthly improvement reported by survey participants, while the German expectations reading remained positive despite its decline. The fall in expectations extended to the euro zone, where the institute's indicator registered plus 18.5 points in the same month. The statement said this reading was 7.3 points below its level in the previous month, coinciding with the decline in the German indicator. October's results thus combined an improved assessment of Germany's economic situation with weaker expectations for both Germany and the euro zone, while both forward-looking indicators remained above negative territory.
Wambach placed high energy prices at the centre of his explanation for weak spending, saying that "private consumption and investment remain weak because of high energy prices". He added that expensive energy was squeezing real incomes while raising production costs, with the burdens he identified affecting both consumers and businesses. The institute's president linked these pressures to continued weakness in consumption and investment, despite the improvement the economy had begun to show as it gradually emerged from stagnation. In its September statement, the institute had described the recovery as driven by fiscal policy and supported by additional impetus from exports. It said at the time that the recovery "remains driven by fiscal policy and supported by additional impetus from exports", identifying the sources of support underpinning activity in the previous month.
The October survey followed an acceleration in German inflation, with final data from the Federal Statistical Office showing consumer prices rising 3.3% year on year in September 2026. The annual rate had stood at 2.9% in August after registering 2.8% in July, extending the rise in inflation across those months. Prices accelerated in the month preceding the expectations survey in which Wambach discussed energy's impact on real incomes and production costs. Meanwhile, core inflation, which excludes food and energy prices, stood at 2.4% year on year in September, according to the Federal Statistical Office. Services prices rose 2.7% year on year in the same month, below the headline inflation rate and above the core rate excluding food and energy.
In the energy price breakdown, the Federal Statistical Office reported that overall energy product prices rose 14.9% in September compared with the same month a year earlier. This annual increase exceeded the rise in overall consumer prices, while some components paid for by consumers moved in the opposite direction. Electricity prices for German consumers fell 5.5% year on year in September, according to the same statement. Consumer prices for natural gas, excluding operating costs, also declined 2.8% from their level a year earlier, alongside the fall in electricity prices. Overall energy product prices remained higher despite these two declines, a divergence among energy components that came as the pressures to which the institute attributed weak private consumption and investment persisted.
The ZEW survey draws on the views of analysts working at banks, insurance companies and major industrial companies on the economic trajectory they expect over the next 6 months. The expectations questions cover this future horizon, alongside an assessment of current economic conditions, which improved in Germany's October result. Participants thus include analysts from financial institutions and industrial companies, while the published economic expectations cover Germany and the euro zone. On the upcoming monetary policy calendar, the European Central Bank's Governing Council concludes its meeting in Frankfurt on October 29, 2026, according to the bank's official calendar. A press conference follows the meeting, placing this European event after the release of the October survey that combined weaker economic expectations with an improved assessment of current conditions in Germany.