ZEW Indicator of Economic Sentiment: Low Seems to Have Been Overcome

The ZEW Indicator of Economic Sentiment for Germany, determined on the basis of the ZEW Financial Market Survey, has remained unchanged in May, following an increase in April. The Indicator now lies at a value of minus 4.3 points.

This corresponds to an increase of 0.2 points since the previous month. The coming months shall show whether this upward trend is set to continue in the long-term. In contrast to the ifo business expectations, the ZEW Indicator of Economic Sentiment has, at least temporarily, stabilised.

In May 2001, 320 analysts and institutional investors from Germany participated in the ZEW Financial Market Survey which is conducted on a monthly basis by the Centre for European Economic Research (ZEW), Mannheim. Analysts were surveyed in regard to their mid-term expectations concerning the economic development and capital market trends. The ZEW Indicator of Economic Sentiment shows the balance between positive and negative expectations regarding future economic activity in Germany.

The reduction of interest rates by 25 points, implemented by the European Central Bank on 10 May 2001, had a negative impact on the ZEW Indicator of Economic Sentiment. This has been confirmed by evaluating the estimates provided by analysts as part of the ZEW Financial Market Survey, before and after the cut in interest rates. If one considers only the estimates given after 10 May,  the Indicators of Economic Sentiment is significantly worse, than those provided prior to this date.

Contact

Dr. Felix Hüfner, E-Mail: huefner@zew.de