ZEW Indicator of Economic Sentiment May 2004 - Downward Trend Lessens

The ZEW Indicator of Economic Sentiment for Germany continues to drop slightly in May. The indicator now stands at +46.4 points compared with +49.7 points in April.

"The financial analysts' opinion has not changed - no good omen for the expected economic recovery. The recovery is anything but certain," comments ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz. The indicator continues to signal cautious optimism for an economic recovery. Nevertheless doubts on its dynamism also slightly rise this month. The strong increase in the oil price, growing interest rate fears, and the still very weak domestic demand have contributed to this. However, a further significant decrease of the indicator seems to have been prevented by the prevailing strong export demand.

The experts' evaluation of Germany's current economic situation is more pessimistic this month. Compared to -72.5 last month, the indicator of the current economic situation decreases to -75.9 points in May. Although the growth of gross domestic product in the first quarter has been slightly higher than expected, it could not prevent a decline in the indicator. The prevailing job market misery is likely to be decisive for this.

Economic sentiment for the euro zone hardly changes in May - in contrast to the economic sentiment for the German market. The indicator gains +0.1 points compared with last month's figures and now stands at +59.2 points. The corresponding indicator of the current economic situation in the euro zone goes up from -54.4 points to -50.6 points.

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