ZEW Indicator of Economic Sentiment July 2005 - Indicator Rises Significantly

The ZEW Indicator of Economic Sentiment for Germany rises in July by a substantial +17.5 points. At its current level of +37.0 points, compared with +19.5 points in June, the indicator again stands slightly above its historical average of +34.2 points.

The significant increase in business confidence may be due to the fact that worldwide economic activity remains stable despite high oil prices. Combined with a weaker euro, this generated a substantial increase in incoming orders in Germany. "It remains to be seen if this rise indeed signifies a sustainable upward correction of expectations. Weak domestic demand still represents a stumbling block on the road to profound and lasting economic recovery. This situation will only change if the necessary reforms in the fields of corporate taxes, social security systems and labor market are continued with sufficient vigour," comments ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The experts surveyed again take a more optimistic view of Germany's current economic situation. The indicator of the current economic situation is up from -70.0 to -66.7 points in July.

Economic expectations for the euro zone have clearly increased in July, too. The indicator gains +12.3 points compared with last month's figures and now stands at +29.0 points. The corresponding indicator for the current economic situation in the euro zone improves from -38.3 to -32.6 points.

294 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. The solid line indicates the historical mean of the indicator.

Contact

Volker Kleff, E-mail: kleff@zew.de 

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