ZEW Indicator of Economic Sentiment - Downward movement continues

The ZEW Indicator of Economic Sentiment for Germany dropped significantly in July 2008. The indicator decreased by 11.5 points and now stands at minus 63.9 points after minus 52.4 points in the previous month. This is still well below its historical average of 28.8 points.

The low level of the economic sentiment indicator reflects increased world-wide risks for the economic activity. The high oil price, the strong euro, the crisis in the United States, the interest rate increase by the ECB and weak domestic consumer demand should negatively affect German companies in the next six months. The difficult business environment for German companies is indicated by the continued decline of incoming orders. Due to the strong decrease of incoming orders business expectations dropped remarkably for companies in the up to now strong machine constructing sector.

"The current problems of US mortgage banks demonstrate that the financial crisis is not over yet. Naturally, this has reinforced the worries of the financial market experts about the economic development in Germany in the next year. Press reports stating that the growth rate of the German economy was negative in the second quarter of this year, might have further burdened the sentiment of our experts", says ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

After the considerable decrease of industrial output the assessment of the current economic situation in Germany worsened significantly in July. The corresponding indicator dropped by 20.6 points to 17.0 points.

The economic expectations for the euro zone declined significantly in July as well. The indicator decreased by 11.0 points and now stands at minus 63.7 points. The indicator for the current economic situation in the euro zone dropped by 11.2 points and now stands at minus 3.3 points.

Contact

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

Matthias Köhler, E-mail: koehler@zew.de