ZEW Indicator of Economic Sentiment - Economic Sentiment Improves Slightly

The ZEW Indicator of Economic Sentiment for Germany improved in February 2008 by 2.1 points and now stands at minus 39.5 points after minus 41.6 points in the previous month. This is still well below its historical average of 30.7 points.

The positive development of the economic sentiment for Germany signals that the current crisis is not expected to trigger a downward spiral for the German economy. The expectations rather indicate a cautious recovery by mid-year. According to the financial market experts, this development should be bolstered by an expansive monetary policy in important industrial countries. Moreover, the prospects of German exporters are expected to slightly improve within the next six months.

"The banks are currently in the doldrums, but the financial experts expect that the worst will be over in six months. This should ease concerns about the development of the German economy. Particularly, fiscal impulses are not necessary to stimulate the economy", said ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

Owing to the tight situation on the financial markets the assessment of the current economic situation in Germany worsened considerably in February. The corresponding indicator dropped by 22.9 points to 33.7 points.

Economic expectations for the euro zone improved in February as well. The indicator increased by 0.3 points and now stands at minus 41.4 points. The indicator for the current economic situation in the euro zone decreased by 26.0 points to 21.8 points.

314 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 January 28 to February 11, 2008 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