ZEW Indicator of Economic Sentiment: Nosedive

The ZEW Indicator of Economic Sentiment for Germany deteriorates strongly by 19.2 points in November. It now stands at 4.2 points compared with 23.4 points in the previous month and is thus lower than in October 2001.

This signals an increased risk of recession in Germany. The need for the European Central Bank to focus on the eurozone as a whole, the uncertainties surrounding the geopolitical risks as well as financial analysts' fears concerning the future direction of German economic policy have all contributed to this decline. ZEW president Prof. Dr. Wolfgang Franz interprets the indicator as showing that "a nose dive in economic activity is anticipated in the first half of 2003".

In November expectations for the eurozone economy again declined less than the German indicator. These now stand at 24.2 points compared to 34.3 points in October.

In November 312 analysts and institutional investors participated in the ZEW Financial Markets Survey which is conducted monthly by the Centre for European Economic Research (ZEW), Mannheim. 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