German Economy Stumbles as Investor Confidence Wanes

Germany's investor morale plunged unexpectedly in January, as the economy contracted for two consecutive years. The dip in the ZEW economic sentiment index reflects worries about household spending, construction demand, and political uncertainty ahead of February elections, alongside concerns over U.S. trade policies.

Germany's investor confidence took a nosedive in January, with the ZEW economic research institute reporting a drop in the economic sentiment index to 10.3 points from December's 15.7. The decline was sharper than analysts' 15.3 prediction, as the nation grappled with consecutive years of economic contraction.

ZEW president Achim Wambach attributed the downturn to stagnant household spending and low construction sector demand, warning that Germany might lag behind its euro zone neighbors if trends persist. The economic challenges also mirror internal political rifts, notably within Chancellor Olaf Scholz's erstwhile three-party coalition, which crumbled last year.

Upcoming elections on February 23 place Germany's sluggish growth at the forefront of political debates. Investor sentiment is further clouded by uncertainties surrounding trade agreements with the U.S., a major trading partner, as potential tariffs under President Trump's administration loom large over future economic relations.

(With inputs from agencies.)