ZEW Indicator of Economic Sentiment - Recovery Gains Momentum

The recovery of the ZEW Indicator of Economic Sentiment for Germany gained momentum in April 2007. The indicator rose by 10.7 points and now stands at 16.5 points after 5.8 points in March. This is still far below its historical average of 33.1 points.

The ZEW Indicator of Economic Sentiment for Germany suggests that the German economy is expected to grow faster in the next six months. The main reason is the surprisingly strong improvement of the labour market which bolsters consumer demand. Domestic investment demand is increasing as well. Moreover, concerns about economic growth worldwide have become smaller. Even though the world economy is supposed to grow more moderately owing to the expected economic downturn in the US, economic growth remains robust.

"The economic upswing is now being felt on the labour market; it is particularly pleasing that the number of employees paying social insurance contributions is increasing. Yet, this should not obscure the fact that so far the recovery has not helped the problem groups on the labour market - low qualified persons and the long-term unemployed", said ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The assessment of the current business situation has improved considerably owing to the strong growth of industry production. The corresponding indicator increased from 69.2 points to 76.9 points in April.

Economic expectations for the euro zone have increased as well. The indicator rose by 5.6 points and now stands at 10.7 points. The corresponding indicator for the current economic situation in the euro zone increased this month by 3.0 to 69.9 points.

320 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 March 26 to April 16, 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