Newly released economic data on Tuesday painted a varied picture for the eurozone, showing a significant increase in Germany's economic confidence alongside a trade surplus for the region that was weaker than anticipated. The recent trade statistics indicated that businesses in Europe and the US are hastening shipments in anticipation of potential tariff increases imposed by Trump. This was evident in the notable rise in transatlantic trade volumes.
In March 2025, Germany's ZEW economic sentiment index surged to 51.6 points, a considerable leap from 26 points in January and surpassing market projections of 48.1. This level of economic optimism is the highest recorded since January 2023.
Achim Wambach, the President of ZEW, remarked, "Economic expectations are showing substantial improvement in March, with a significantly rising ZEW Indicator of Economic Sentiment." This positive outlook is likely attributed to optimistic signs concerning Germany's future fiscal policies, including the approval of a multi-billion-euro financial package for the federal budget. The outlook for metal and steel manufacturers, as well as the mechanical engineering sector, has improved noticeably. Additionally, the European Central Bank's consecutive interest rate reductions have facilitated favorable financing conditions for private households and businesses.
The overall eurozone ZEW economic sentiment index also saw an increase, climbing by 15.6 points to reach 39.8, marking its highest level in eight months.
In a departure from its traditional fiscal conservatism, Germany recently announced a substantial fiscal expansion plan aimed at enhancing defense capabilities and rejuvenating its economy. This initiative involves a €500 billion infrastructure fund spread over 12 years, with €100bn allocated for climate and economic transformation projects. Germany also plans to relax its constitutionally mandated debt limit to enable increased borrowing, particularly for defense expenditures. These measures are expected to receive approval from the Bundestag this week.
Conversely, the eurozone's trade surplus in goods notably decreased to only €1bn in January 2025, a sharp decline from €10.6bn the previous year, as per Eurostat data. This drop was also a significant decrease from the previous month's surplus of €15.4bn. The decline was primarily driven by weaker performances in machinery, vehicles, and other manufactured goods. Machinery and vehicle surplus dropped from €16.5bn in December to €7.4bn in January, while other manufactured goods shifted from a €1.2bn surplus to a €4.6bn deficit.