ZEW Indicator of Economic Sentiment - Political Uncertainty Depresses Sentiment

The ZEW Indicator of Economic Sentiment for Germany decreases by a substantial -11.4 points in September. Standing at +38.6 points versus +50.0 points in August, it is still above its historical average of +34.3 points.

An essential reason for the declining indicator is that uncertainty about the future economic policy may affect the investment climate and puts the economic upswing at risk. A separate evaluation, which considers only the answers given after the election on Sunday, produces a clear drop in German economic expectations compared to total answers. Private consumer demand could be threatened because oil prices have risen again - which may be another explanation for the declining indicator. And the damage caused by the Hurricane Katrina may impair global economic development.

Thanks to a robust industrial output, the experts are still confident about this month's economic situation in Germany. The indicator of the current economic situation increases from -61.1 to -58.1 points.

Economic expectations for the euro zone have worsened, too. In September, the euro indicator falls by -9.8 points compared with last month's value and now stands at +31.8 points. The corresponding indicator for the current economic situation in the euro zone rose from -33.3 to -26.1 points.

309 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