ZEW Indicator of Economic Sentiment - Economic Sentiment deteriorates further

The ZEW Indicator of Economic Sentiment for Germany decreased in January 2008 once again and now stands at minus 41.6 points after minus 37.2 points in the previous month. This is still well below its historical average of 31.0 points.

The largest risk for the development of the German economy is the danger of a recession in the United States following the financial market crisis. Together with a strong euro it might undermine exports. German hopes for the economic development are pinned on private consumption which is supported by the recovery on the labour market. However, the price increases of daily life products put pressure on private consumption.

"Private consumption will play a decisive role for the economic development in the upcoming months. However, the introduction of minimum wages or excessive wage claims are not appropriate measures in order to increase consumer spending as they go with cuts in employment", said ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The assessment of the current economic situation in Germany also worsened in January. The corresponding indicator dropped by 6.9 points to 56.6 points.

Economic expectations for the euro zone worsened in January. The indicator diminished by 6.0 points and now stands at minus 41.7 points. The indicator for the current economic situation in the euro zone decreased by 11.8 points to 47.8 points.

270 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 from December 24, 2007 to January 14, 2008 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 horizontal line indicates the historical mean of the indicator.

Contact

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

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