Germany's ZEW Indicator of Economic Sentiment rose by 15.8 points to 26.3 in July 2026, following a 20.7-point surge in June and clearly surpassing market expectations of 18. This was the highest reading since February, before the conflict in the Middle East began weighing on global confidence, and it indicates that Germany’s reform package is starting to bolster the economic outlook.
The improvement was underpinned by stronger expectations for export-oriented industries and resilient domestic demand, although the conflict in Iran and elevated oil prices continue to pose significant risks to the recovery. Most sectors recorded gains in July, led by mechanical engineering (+14.5 points) and private consumption (+14.7 points). The construction sector also strengthened, rising by 12.7 points and moving closer to neutral territory.
By contrast, the chemical, pharmaceutical, and metal industries remained in negative territory despite modest improvements. The automotive sector deteriorated notably, with its sentiment balance dropping by 11.3 points to -46.6.
