ZEW Indicator of Economic Sentiment: Considerable Slump

The ZEW Indicator of Economic Sentiment for Germany falls by 25.7 points in August. It is now standing at 43.4 points compared with 69.1 points in the previous month. This is the largest decrease in two years.

"The economic recovery is slowing down", said ZEW president Prof. Dr. Wolfgang Franz. Obviously, the stock market declines are now taking their toll. Analysts are expecting negative consequences for the real economy, for instance, due to a more difficult situation for corporate financing or dampened consumer spending. The risks for the economy early next year have thus increased.

In August 315 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. According to the analysts the inflation risks have become more subdued in August. In line with the deterioration in the economic outlook the survey participants expect no change in the German inflation rate over the next six months.

Contact

Dr. Felix Hüfner, Email: huefner@zew.de

Volker Kleff, Email: kleff@zew.de