The economic expectations of the financial market experts who are surveyed by the ZEW, the Centre for European Economic Research, Mannheim, supported by Erste Bank der oesterreichischen Sparkassen, Vienna, for Central and Eastern Europe declined for the third month in a row. The drop of 5.0 points, however, measures low compared to the fall in previous months.
The ZEW-Erste Bank sentiment indicator CEE for economic expectations in December stands at -22.7 points. In contrast to the expectations of economic development, the estimations of the present economic situation in the region fell more than they have in the past months. The fraction of experts regarding the current economic situation in Austria as good shrank in the December survey. Rising pessimism characterizes also the assessment of the future economic situation.
After a slight recovery in September, the CEE indicator that is calculated as the balance of positive and negative assessments for the economic development in CEE countries within the next six months has resumed its downward trend. Although the fraction of analysts expecting a business cycle improvement in the next six months dropped only slightly, negative forecasts of experts dominate the indicator movement. The CEE indicator fell 5.0 points down to -22.7 points. The majority (58.5 percent) of surveyed analysts, however, still believe that no significant change is to be expected.
The results of the December survey continue to indicate a positive assessment of the current economic situation in the Central and Eastern European countries. However, the number of positive assessments is falling in favour of neutral positions. The balance has fallen 17.8 points to 33.2 points. Expectations for Austria's economy dropped most strongly this month. The fraction of analysts forecasting a slowdown in the next six months rose by 15.7 points. The corresponding balance has thus hit a record low since the start of the survey (-36.5 points). Although none of the surveyed experts regard the economic situation as negative, the indicator has dropped 17.0 points down to 45.5 points. This is due to the contraction (from 62.5 percent to 45.5 percent) in the percentage of participants that assessed the economic situation as good.
Expectations regarding the change in the inflationary risk of the CEE countries are fairly heterogeneous. While experts expect the risk of rise in inflation in the Czech Republic and Romania to fall, they forecast this risk to rise in Austria Slovakia, Poland, Croatia and the CEE region as a whole. For the first time they also forecast no decrease in the inflation rate in Hungary. The corresponding balance climbed from -16.4 up to 0.0 points.
The fraction of analysts that considers an increase in the short-term interest rate in the next six months to be likely has increased for all examined countries. Only for the Eurozone the balance drops with 4.0 points to 2.0 points. The majority still expects no change in short-term interest rates.
In line with the positive turn on world stock markets, the optimistic expectations for the European stock market do not decline so strong for the first time since September. 43.4 percent (40 percent in the previous month) of analysts expect an advance in the Eurostoxx 50 index. The balance fell slightly by 2.5 points (in November -25.9 points) to 6.4 points. Even more positive is the outlook of the Austrian stock market. 45.0 percent (39.1 percent in the previous month) expect the ATX to advance in the next six months. The indicator reached 15.0 points (+2.7 points) in December. In contrast, forecasts for the stock indices in Central and Eastern Europe fell again. The indicator for the NTX sank 22.0 points down to 6.6 points. Nevertheless, the majority of experts forecast a rise in stock prices of all examined countries, excluding Hungary and Slovenia.
The special question at the year end deals with the intended equity portfolio allocation for the year 2008. The participants expect higher levels of the indices NTX, S&P 500, Eurostoxx 50 and Nikkei 225 at the end of 2008 compared to the current levels. Concerning the sector allocation the experts intend to overweight energy as well as utilities and telecommunication stocks in their portfolios. The intended investment focus represents the expected earning growths in these sectors
The Financial Market Survey CEE is a survey carried out by ZEW Mannheim and Erste Bank der oesterreichischen Sparkassen AG Vienna, among financial market experts and has been conducted monthly since May 2007. It offers insights into the experts' assessment of the current economic situation and their expectations for Central and Eastern Europe, Austria and the Eurozone for the next six months concerning the general economic situation, inflation rates, interest rates, exchange rates and stock market indices. The CEE region observed in the survey consists of Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia and Slovenia.
The indicators reflect the difference between the percentage of analysts who are optimistic and the percentage of analysts who are pessimistic. The possible outcome of the balance lies between -100 and +100 points. Positive values of the balance indicate that the number of participants expecting a rise in the respective variable outweighs the number of participants with negative expectations.
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