ZEW Indicator of Economic Sentiment - Expectations Drop Slightly

The ZEW Indicator of Economic Sentiment for Germany has dropped by 1.6 points in March 2011. The indicator now stands at 14.1 points. This value is below the indicator’s historical average of 26.7 points.

Overall, the indicator shows that financial market experts continue to expect a positive economic development during the forthcoming six months. The current survey period covered two major events: First of all, the European Central Bank (ECB) announced that it would be very vigilant with respect to inflation risks. Secondly, there was the severe earthquake in Japan. The two events had an identifiable impact on expectations: At the beginning of the survey period (February 28th to March 3rd) expectations concerning German economic activity were more optimistic than in the February survey. During this time period 81 opinions were obtained. According only to these estimations the Indicator of Economic Sentiment for Germany would reach 22.5 points. Because of the hint of the ECB, that it might raise the key interest rate earlier than expected, economic sentiment deteriorated. During the time period from March 4th to March 10th, i.e. after the ECB announcement but before the Japanese earthquake, 79 respondents handed in their questionnaires. If only these responses were evaluated economic sentiment for Germany would stand at 12.6 points. Due to the news from Japan economic sentiment for Germany declined once again. During the time period from March 11th to March 14th 110 respondents handed in the questionnaires. Focusing exclusively on their responses the indicator of economic sentiment for Germany would reach the 9.1 points mark.

"The German economy is in a robust shape. Nevertheless, the tragic events in Japan could slow down the dynamics of German economic growth at least in the short run", says ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The assessment of the current economic situation in Germany has remained almost unchanged in March. The corresponding indicator has risen by 0.2 points to 85.4 points. Economic expectations for the eurozone have increased by 1.5 points in March. The respective indicator now stands at 31.0 points. The indicator for the current economic situation in the eurozone has improved by 0.3 points and now stands at 6.4 points.

For further information please contact

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

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