ZEW Indicator of Economic Sentiment November 2004 - Dampened Economic Expectations

The ZEW Indicator of Economic Sentiment for Germany shows a clear decrease of -17.4 points in November. Now standing at 13.9 points following 31.3 points in October, the indicator is now well below its historical average of 34.6 points.

Thus, the experts expect economic growth to slow down in the period up to May of next year. The reasons for this markedly increased pessimism may include an expected worldwide economic slowdown and the very distinct appreciation of the Euro which has taken place recently and which could prove a burden for German external trade. In conjunction with restrained domestic demand and persistent high oil prices the experts expect German economic activity to slow down over the medium term. Continuing weak data for industrial production and incoming orders may be the first signs of decreasing growth momentum.

Experts take a more positive view of the economic situation in the current month. The corresponding indicator rises from -58.9 points to -57.8 points.

Economic expectations for the euro zone further decline in November. The indicator loses -15.5 points compared with last month's figures and now stands at +22.1 points. The corresponding indicator for the current economic situation increases from -26.0 points to -25.8 points.

304 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-term 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. The solid line indicates the historical mean of the indicator.

Contact

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

Dr. Sandra Schmidt, E-mail: schmidt@zew.de