ZEW Indicator of Economic Sentiment July 2004 - Stabilization Raises Hopes

The ZEW Indicator of Economic Sentiment for Germany increased slightly in July. The indicator now stands at +48.4 points, compared with +47.4 points in June.

The indicator remains above its historical mean of +34.7 points and continues to signal moderate optimism for economic sentiment in Germany. "This is good news, but financial analysts still seem to be waiting for notable domestic stimulus to spur the economic recovery which has been export-driven thus far," comments ZEW president Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

Indeed, the increase in the indicator is mainly due to strong foreign demand which proved to be great again thanks to the substantial economic upswing worldwide. The stabilization on the job market may have had a beneficial influence as well. Nevertheless, experts do not seem to be all that optimistic, unless there is a considerable upswing of domestic demand. Furthermore, the high oil price and the feeble US-Dollar are an additional burden for the German economy. The experts' evaluation of Germany's current economic situation turned out to be less pessimistic. Compared to last month's -69.8 points, the indicator of the current economic situation increased to -69.3 points.

Economic sentiment for the euro zone slightly decreased in July. The indicator lost -1.3 points versus last month's figures and now stands at +55.5 points. The corresponding indicator of the current economic situation in the euro zone continued to rise from -45.0 points to -40.5 points.

288 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 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.

Contact

Volker Kleff, E-mail: kleff@zew.de

Prof. Dr. Michael Schröder, Phone: +49 (0)621 1235-140, E-mail: schroeder@zew.de

Dr. Friedrich Heinemann, Phone: +49 (0)621 1235-149, E-mail: heinemann@zew.de