ZEW Indicator of Economic Sentiment - Experts Expect Limited Potential for Further Improvement of the German Economy

The ZEW Indicator of Economic Sentiment for Germany drops by 7.5 points in July 2010. The indicator now stands at 21.2 points after 28.7 points in the previous month. This value is below the indicator’s historical average of 27.4 points.

This is a stark contrast to the economic situation. Positive data on industry activity show the favourable development of the German economy during the second quarter 2010. This may have contributed to the further improvement of the assessment of the current economic situation by the financial market experts in July. For the first time since July 2008 this indicator turns positive. The considerable improvement in the economic situation together with the decline in expectations signals that - until the end of this year - the potential for further improvements of the German economy seems to be widely used up. Particularly the crisis in sovereign debt and the resulting need for consolidation of budgets in various countries seem to have contributed to the subdued economic expectations.

"Contrary to the positive assessment of the current economic situation financial experts expect that the dynamics in German business activity will slow down towards the end of this year due to still existing uncertainties regarding the handling of the crisis of financial markets and the crisis of sovereign debt", says ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

Once again, the assessment of the current economic situation in Germany improves considerably compared to the previous month. In July the corresponding indicator rises by 22.5 points to 14.6 points. The economic expectations for the euro zone decline by 8.1 points in July. The respective indicator now stands at 10.7 points. The indicator for the current economic situation in the euro zone improves by 14.3 points and now stands at minus 26.5 points.

For further information please contact

Dr. Christian David Dick, E-mail: dick@zew.de

Frieder Mokinski, Phone: +49 (0)621/1235-143, E-mail: mokinski@zew.de