ZEW Indicator of Economic Sentiment - Expectations Drop Significantly

The ZEW Indicator of Economic Sentiment for Germany dropped significantly in June 2008. The indicator decreased by 11.0 points and now stands at minus 52.4 points after minus 41.4 points in the previous month. This is still well below its historical average of 29.2 points.

The economic sentiment indicator seems to have been influenced by different factors. On the one hand, repeatedly decreasing incoming orders indicate that Germany’s momentum will loose steam in the next six months. On the other hand, continuing price increases for energy and food are reducing the purchasing power of consumers. Furthermore, loan conditions for companies should worsen as a result of the financial market crisis and the expected interest rate increase by the ECB.

"The expectations of the financial market analysts are strongly influenced by the current forecast of a weaker economic momentum in 2009. Against this background, it is all the more important that Germany’s Federal Government keeps on the right track in its economic policy and does not jeopardize what has already been achieved", says ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz. The assessment of the current economic situation in Germany decreased slightly in June 2008. The corresponding indicator dropped by 1.0 points to 37.6 points.

The economic expectations for the euro zone dropped significantly in June as well. The indicator decreased by 9.1 points and now stands at minus 52.7 points. The indicator for the current economic situation in the euro zone decreased by 3.5 points and now stands at 7.9 points.

Contact

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

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