MNI DATA BRIEF: German Sentiment Up Modestly; Outlook Slumps

German economic sentiment improved modestly in August, with the ZEW indicator stretching 7.4 higher over July to stand at 29.3. However, expectations dropped precipitously for the third straight month, slumping by 22.9 points to 40.4.

"This points to increasing risks for the Germany economy," including a possible fourth Covid wave or a Chinese slowdown, said ZEW President Professor Achim Wambach, adding that the slump in current sentiment reflected output already recovered in the second quarter.

Eurozone inflation expectations fell by 27.4 points, a more precipitous fall than the 10-point decline recorded in July, "in parallel with the decline in economic expectations," said the ZEW. Eurozone economic sentiment fell for the third straight months to 42.7, an 18.5 decline from July.