ZEW Indicator of Economic Sentiment - Financial Crisis Reduces Economic Expectations

The ZEW Indicator of Economic Sentiment for Germany dropped in October 2008 by 21.9 points. The indicator now stands at minus 63.0 points after minus 41.1 points in the previous month. This is still well below its historical average of 27.5 points.

A separate analysis was made for 39 answers that came in on October 13th, the day on which the German government decided in favour of a rescue package for the German banking sector. It shows that the decline of the economic expectations for Germany was less pronounced after the decision on the rescue package was made.

Because of the financial market crisis the perspectives for the economic development in Germany have significantly deteriorated. Besides the financial sector, the export industry should by particularly hit by the crisis. Moreover, private households might reduce their consumption expenditures due to the tense situation in the financial markets and the extreme uncertainty.

"The concerns of the financial market experts that the crisis on the financial markets might spill over to the real economy increased this month. The recently decided rescue package of the German government should, however, help to stabilise the situation", says ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The assessment of the current economic situation in Germany significantly worsened in October 2008. The corresponding indicator dropped by 34.9 points to minus 35.9 points.

The economic expectations for the euro zone deteriorated in October as well. The indicator declined by 21.8 points and now stands at minus 62.7 points. The indicator for the current economic situation in the euro zone dropped by 34.7 points and now stands at minus 44.7 points.

For further information please contact

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

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