ZEW Indicator of Economic Sentiment - Expectations stabilize

The ZEW Indicator of Economic Sentiment for Germany stabilized in May 2008. The indicator slightly decreased by 0.7 points and now stands at minus 41.4 points after minus 40.7 points in the previous month. This is still well below its historical average of 29.6 points.

The development of the ZEW Indicator of Economic Sentiment seems to have been mainly influenced by the following two factors. On the one hand, economic expectations for the next six months for the United States and consequently also for the German export industry have increased considerably. On the other hand, inflationary risks remain high. This should negatively affect private consumption in Germany.

"German firms were very successful in the first quarter of 2008. However, the economic momentum should gradually loose speed because of increasing refinancing costs and a strong euro. This should have a negative impact on firms.", said ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The assessment of the current economic situation in Germany improved in May. The corresponding indicator increased by 5.4 points to 38.6 points. A separate analysis up to May 14, 2008 shows that the assessment of the current economic situation in Germany improved after the publication of the

German GDP-growth for the first quarter of 2008. The ZEW Indicator of Economic Sentiment, in contrast, worsened.

Economic expectations for the euro zone stabilized in May. The indicator slightly increased by 1.2 points and now stands at minus 43.6 points. The indicator for the current economic situation in the euro zone dropped by 4.1 points and now stands at 11.4 points.

Contact

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

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