ZEW Indicator of Economic Sentiment - Expectations Decrease Strongly

The ZEW Indicator of Economic Sentiment for Germany drops by 18.3 points in September 2010. The indicator now stands at minus 4.3 points after 14.0 points in the previous month. This value is below the indicator’s historical average of 27.2 points.

After a strong growth in the second quarter of this year, industrial production in Germany stagnated in July. There was also a decline in incoming orders compared to the previous month. This may not only indicate a temporary slowdown but could well be the first sign of a flattening of economic activity. Likewise, the financial market experts surveyed by ZEW do not expect capacity utilisation of the German economy to improve further during the next half year. The reasons for this could be the expiring of economic stimulus measures in many countries and the fact that many industrialised countries have not yet recovered from the crisis. This puts pressure on the export-oriented sectors.

"In their expectations, financial experts put more weight on risks than they did before. These are for example the slowdown of the US growth and the yet unresolved problems in the euro zone which are for instance reflected by the large interest rate spreads for Greek government bonds.

Nevertheless, the risk of a double dip remains low for Germany", 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 September the corresponding indicator rises by 15.6 points to 59.9 points. The economic expectations for the euro zone drop by 11.4 points in September. The respective indicator now stands at 4.4 points. The indicator for the current economic situation in the euro zone improves by 6.7 points and now stands at minus 6.3 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