ZEW Indicator of Economic Sentiment - Small Correction of Expectations

The ZEW Indicator of Economic Sentiment for Germany dropped by -6.4 points in March. Compared with +69.8 points in February, the indicator's current level of +63.4 points is far above its historical average of + 35.1 points.

The economic expectations for the next six month are dominated by two contradictory tendencies. On the one hand, domestic demand is expected to develop positively due to high company profits and the premature purchase of durable consumer goods. On the other hand, the increasingly restrictive monetary policy around the world might dampen the global economic situation and negatively affect German exports.

"The financial experts are apparently motivated by the general positive climate. The harsh economic reality, with its big reform plans still unresolved, increasingly seems to influence economic expectations", said ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.

The experts surveyed take a much more optimistic view of Germany's current economic situation. The corresponding indicator is up from -19.5 points to -8.4 points in March.

Economic expectations for the euro zone have slightly decreased in March. The indicator now stands at +61.1 points versus +66.0 points in February. This month the corresponding indicator for the current economic situation in the euro zone has increased by +8.1 points to +2.0 points.

Table corresponding to the ZEW Indicator of Economic Sentiment March 2006

311 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 February 27 to March 13, 2006 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