ZEW Indicator of Economic Sentiment: Again A Clear Rise

The ZEW Indicator of Economic Sentiment for Germany clearly increases by +9.0 points in February. It now stands at +35.9 points following +26.9 points in January. Thus, the indicator again stands approximately at its historical average of +34.4 points.

A striking rise of incoming orders in December may have made a positive contribution to this development. Particularly national demand for investment goods generated the highest monthly value in ten years. Therefore, this could be interpreted as a signal for an economic upturn in Germany in 2005. "Fortunately, the expectations of the financial market analysts indicate a more stable upward trend of the domestic economy than skeptics assumed", comments ZEW-President Prof. Dr. Dr. h.c. mult. Wolfgang Franz. Historically low interest rates and the fact that the oil and foreign exchange markets continued to calm down may also have contributed to increasing optimism.

The favorable development of industrial production may have been a final reason for a more positive view of the economic situation in the current month. The indicator of the current economic situation rises from -61.2 points to -58.7 points in February.

Economic expectations for the euro zone also improve in February. The indicator gains +6.1 points compared with last month's figures and now stands at +36.0 points. The

corresponding indicator for the current economic situation in the euro zone increases from -30.0 points to -23.7 points.

318 analysts and institutional investors participated in this month's ZEW Financial Markets Survey which is conducted on a monthly basis 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. The solid line indicates the historical mean of the indicator.

Contact

Volker Kleff, E-mail: kleff@zew.de

Dr. Sandra Schmidt, E-mail: s.schmidt@zew.de