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Economy in Brief

German Investors and Analysts Losing Confidence in Germany's Recovery
by Louise Curley April 20, 2004

Institutional investors and analysts poled by the ZEW Center for European Economic Research are losing confidence in the German recovery. The ZEW indicator of economic sentiment, while still positive, indicating that the optimists outweigh the pessimists, fell to 49.7 in April. This was the fourth month of decline and is now 32% below the peak of December 2002.

Using industrial production, excluding construction, as a proxy for the economy, we find, according to the attached chart, that the Zew indicator tends to lead economic activity. As a result, the recent trend in the Zew indicator suggests that the economic recovery in Germany may be fall far short of previous expectations.

Institutional investors and analysts continue to view the stock market more favorably than the bond market. The stock market indicator in April was 6.7, up 0.6 points from March to April and 0.7 points above April 2003. The bond market indicator in April was -6.8, an increase of 0.1 points from March, but 3.9 points below the year ago figure.

Zew Indicators Apr 04 Mar 04 Apr 03 M/M 
 chg
Y/Y 
 chg
2003 2002 2001
  Economic Sentiment 49.7 57.6 14.0 -7.9 31.3 38.4 45.3 2.8
  Stock Market 6.7 6.1 6.0 0.6 0.7 6.5 2.0 7.3
  Bond Market -6.8 -6.9 -2.9 0.1 -3.9 -4.8 -4.3 0.3
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