German investor sentiment declined sharply in August, with the ZEW Economic Sentiment Index falling to 34.7 from 52.7 in July, below the estimated 39.5. The current conditions assessment worsened to -68.6, deeper than the expected -67.0 and the previous -59.5. This drop reflects investor disappointment following the EU-US trade deal and ongoing sluggish economic growth. Key sectors such as chemical, pharmaceutical, mechanical engineering, metal, and automotive industries were notably affected, contributing to the negative outlook. Despite the DAX index trading near record highs, investor confidence has weakened. The German Economy Ministry reported no clear signs of economic recovery despite a basic agreement on US tariffs, and inflation is expected to remain stable for the rest of the year. Meanwhile, industrial production in Germany has been in recession, declining approximately 10% over two years to its lowest level in five years, with energy-intensive output falling about 20% over three years, below the 2020 crisis level. Economists have expressed concern over the slow pace of reforms under Chancellor Friedrich Merz, whose approval ratings have dropped below 30% after 100 days in office. The lack of political momentum for deregulation and structural reforms has been highlighted as a major issue for the German economy, which has not grown since 2017.