ZEW Indicator of Economic Sentiment - First Tendency to Stabilization

The ZEW Indicator of Economic Sentiment for Germany remained unchanged in October 2007 and stands like in the previous month at minus 18.1 points. This is still well below its historical average of 32.1 points.

The almost unchanged economic expectations indicate that the most pressing downward corrections following the crisis on the financial markets seem to have come to an end. The greatest risk factor for the development of the German economy in the following six months are the exports, which are expected to decrease owing to the strong Euro and the decreasing rate of growth of the US-economy. The cornerstone of the further development of the German economy is the labour market. However, the current discussion on the Hartz-IV reforms on the German labour market might impair expectations.

The assessment of the current economic situation in Germany worsened in October. The corresponding indicator declined by 4.2 points to 70.2 points.

Economic expectations for the euro zone improved in October. The indicator rose by 1.3 points and now stands at minus 19.0 points. The corresponding indicator for the current economic situation in the euro zone decreased by 2.7 points to 62.9 points.

278 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 October 1 to October 15, 2007 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