ZEW Indicator of Economic Sentiment - Upward Trend Continues

The ZEW Indicator of Economic Sentiment for Germany has continued its upward trend in May 2007. The indicator rose by 7.5 points and now stands at 24.0 points after 16.5 points in April. This is still below its historical average of 33.0 points.

The expectations of the financial experts indicate that confidence in the stability of the economic recovery in Germany has stabilised. The most recent developments give proof to this fact. Particularly investment demand has risen strongly and consumption demand is expected to recover within the next months owing to the continuous improvement of the German labour market.

"The economic upswing in Germany seems to be hardly influenced by the value-added tax increase and the economic downturn in the US. Increasing employment rates in all economic sectors and a good investment climate put the upswing on a sustainable growth path," said ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The assessment of the current business situation has reached a new all-time high in May. The corresponding indicator increased from 76.9 points to 88.0 points in May. One reason was the growth rate of German GDP in the first quarter of 2007, which was stronger than expected.

Economic expectations for the euro zone have increased as well. The indicator rose by 11.6 points and now stands at 22.3 points. The corresponding indicator for the current economic situation in the euro zone increased this month by 11.9 to 81.8 points.

301 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 April 30 to May 21, 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