ZEW Indicator of Economic Sentiment - Experts Are Increasingly Relaxed

The ZEW Indicator of Economic Sentiment for Germany continued its recovery in February 2007. Compared with minus 3.6 points in January, the indicator’s current level of plus 2.9 points is still far below its historical average of 33.3 points.

The rise of the indicator signals that the German economy will pick up speed again in the second half of 2007. Analysts thus seem to assume that domestic investment spending will develop dynamically and that consumer spending will stabilize. Furthermore, good news on economic growth and consumer spending in the US has improved the international business climate for German companies.

"Luckily, the development of the indicator signals that the dampening effect of the value-added tax increase is mainly a temporary phenomenon according to the financial experts. Now it is decisive that die German government uses the good business climate for a targeted reform of the corporate tax system and the low-wage sector", said ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

In contrast, the dynamic in the assessment of the current business situation has diminished. The corresponding indicator increases only slightly from 70.6 points to 70.9 points in January.

Economic expectations for the euro zone improved considerably in February. The indicator rose by 8.6 points and now stands at plus 6.8 points. The corresponding indicator for the current economic situation in the euro zone increased only slightly this month by 0.6 to 66.7 points.

309 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 EconomicResearch (ZEW), Mannheim. The participants were asked from January 29 to February 12,2007 about their medium-term expectations concerning economic activity and capitalmarkets. 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 horizontal line indicates the historical mean of the indicator.

Contact

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

Matthias Köhler, E-mail: koehler@zew.de