ZEW Indicator of Economic Sentiment - Strength of Economic Upswing is Weakening

The ZEW Indicator of Economic Sentiment for Germany dropped by 9.9 points in July 2007 and now stands at 10.4 points after 20.3 points in June. This is still below its historical average of 32.8 points.

The financial market experts expect an economic downturn within the next six months particularly in the consumption and constructing sector, which could be attributed to the upward trend of the oil price and higher interest rates. Economic perspectives for the US are more critical according to the experts. And export opportunities of German companies are being limited due to the appreciation of the Euro versus the US-dollar.

"The expectations indicate that the German economy will start off with less momentum in the year 2008. Economic growth will probably follow the overall growth trend," said ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The indicator for the current economic situation remained on a high level and decreased slightly by 0.5 points to 88.2 points in July.

Economic expectations for the euro zone have dropped as well. The indicator dropped by 11.8 points and now stands at 7.2 points. The corresponding indicator for the current economic situation in the euro zone decreased this month by 5 points to 81 points.

306 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 from July 2 to July 16, 2007 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 horizontal line indicates the historical mean of the indicator.

Contact

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

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