ZEW Indicator of Economic Sentiment: Sentiment Improves After Rate Cut

The ZEW Indicator of Economic Sentiment for Germany increased for the sixth month in a row in June. Compared with the previous month's result the indicator gained +2.6 points and now stands at +21.3 points.

The European Central Bank's interest rate cut by 50 basis points had a decisive influence on analysts' expectations. The 116 responses given prior to the rate cut reveal an indicator value of only +5.2 points, while the indicator rose to +31.7 points after the ECB decision on June 5. Obviously, analysts expect the rate cut to have a positive effect on the German economy. The good performance of the stock markets and a first ray of hope in the German economic reform discussion contributed to the improvement in sentiment. "Fortunately, expectations have stabilised. Now it is up to economic policy to set the conditions for an upturn in the economy" comments ZEW president Prof. Dr. Wolfgang Franz.

Expectations for the eurozone economy show a similar picture. Compared to May, the index increased by +2.5 points and now stands at +38.0 points.

294 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, Germany. 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.

Contact

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

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

David Lahl, E-mail: lahl@zew.de