The ZEW survey on German economic expectations for March 2026 showed a severe deterioration because of the Middle East war. The expectation index dropped 58.8 points to -0.5, a fall of 58.8 points compared with the previous month, according to the Centre for European Economic Research (ZEW) in Mannheim on Tuesday.
In contrast, the assessment of the current economic environment improved slightly. The gauge for Germany now reads -62.9 points, 3.0 points higher than in February.
ZEW president Achim Wambach said that the escalation in the Middle East is driving energy prices sharply higher and adding inflationary pressure. “This raises the risk that the ongoing recovery trend will be slowed” he added. “The severity of the effects will depend on how long and how intensely the conflict lasts”. Financial‑market experts, however, are skeptical that the conflict will end quickly.
Only a few sectors saw any improvement in March. Energy‑intensive industries suffered the biggest setbacks: the chemical and pharmaceutical sector fell 43.6 points versus February, the automotive sector 34.3 points, and machinery manufacturing 35.5 points. The steel, metal, and construction sectors also recorded strong declines; the construction slump may partly reflect expectations of rising interest rates. About 80 percent of respondents anticipate inflationary pressure in both Germany and the Eurozone.
Eurozone expectations fell sharply in March, slipping to -8.5 points and moving into negative territory. The index is 47.9 points lower than in February. The assessment of the current situation in the Eurozone also worsened, registering -29.9 points, 16.3 points below the previous month.