ZEW Indicator of Economic Sentiment - Subprime Crisis is Extending

The ZEW Indicator of Economic Sentiment for Germany decreased significantly in November 2007 and now stands at minus 32.5 points after minus 18.1 points in the previous month. This is still well below its historical average of 31.8 points.

Owing to the continuously extending subprime crisis the financial market experts have re-adjusted their economic expectations. They particularly expect a considerable economic downturn in the United States. The weak US-dollar has made business conditions for German exporting firms more difficult. Further risks arise from the high oil price and the development of consumer prices.

"Risks are particularly important for the assessment of financial market experts. The financial crisis is not over yet, and the depreciation of the US-dollar puts a burden on the German export industry. It is therefore to be expected that the economic development may lose considerable speed", said ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The assessment of the current economic situation in Germany stabilised in November. The corresponding indicator decreased by 0.2 points to 70.0 points.

Economic expectations for the euro zone decreased in November. The indicator dropped by 11.0 points and now stands at minus 30.0 points. The corresponding indicator for the current economic situation in the euro zone decreased by 2.7 points to 60.2 points.

269 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 October 29 to November 12, 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

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

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