ZEW Indicator of Economic Sentiment - Expectations on the Rise

The ZEW Indicator of Economic Sentiment for Germany increases significantly by +9.4 points in January. Compared with +61.6 points in December, the indicator's current level of +71 points is far above its historical average of +34.7 points.

German suppliers of investment goods reported a positive order intake, which indicates some stabilization or even a slight acceleration of domestic investment activity and strong foreign demand for German products. This development supports the growing confidence of the financial market analysts. Moreover, durable consumer goods are being purchased prematurely in 2006 due to the value added tax rise in 2007. The resulting one-time revenue will support an economic upswing this year.

"The perspectives for 2006 have brightened considerably. I interpret the financial market analysts' positive expectations as premature trust in the economic policy in the months to come. Now it is decisive that both economic and wage policy come up to these expectations", said ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The experts surveyed also take a much more optimistic view of Germany's current economic situation. The corresponding indicator is up from -44.4 points to -31.6 points in January.

Economic expectations for the euro zone have also improved in January. The indicator gains +14.9 points compared with last month's figures and now stands at +66.1 points. The corresponding indicator for the current economic situation in the euro zone increases by +6.9 to -9.9 points.

303 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, 27, 2005 to January, 9, 2006 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

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

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