ZEW Indicator of Economic Sentiment March 2004 - Doubts about lasting recovery

The ZEW Indicator of Economic Sentiment for Germany dropped significantly in March. The indicator now stands at +57.6 points compared with +69.9 points in February.

Although experts reckon that economic recovery will continue there are doubts as to whether the speed of recovery can be kept up. When analysing the responses given before and after the bombings in Spain the findings reveal that the bombings hardly seem to have caused the decline in economic expectations (before: +59.1 points, after: +55.9

points). What is more important is the hesitant recovery of the US job market confirming concerns that the US upswing may not be sustainable. This would affect the German economy, as it depends very much on the export business."If the world economy started stuttering alongside with the US economy, the German recovery might be stalled. Moreover, we can now feel the effects of the statements made by the reform opponents as well as of the union wage policy which has a negative impact on the job market," said ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The experts' evaluation of Germany's current economic situation is slightly more pessimistic this month. Compared to 72.2 percent in the previous month 74.0 percent of those interviewed still feel that the economic situation in Germany is poor. Economic sentiment for the Euro Zone also declined in March. The indicator lost -11.3 percent compared with last month's figures and now stands at +64.3 points. 54.0 percent of those interviewed regarded the current economic situation in the Euro Zone as poor.

313 analysts and institutional investors participated in this month's ZEW Financial Markets

Survey which is conducted on a monthly basis by the Centre for European Economic Research (ZEW), Mannheim. The participants were asked about their medium-range expectations concerning economic activity and capital markets. The ZEW Indicator of Economic Sentiment shows the balance between positive and negative expectations regarding future economic activity in Germany within a timeframe of six months.

Contact

Volker Kleff, E-mail: kleff@zew.de

Dr. Claudia Stirböck, E-mail: stirboeck@zew.de

Dr. Friedrich Heinemann, Phone: +49 (0)621 1235-149, E-mail: heinemann@zew.de