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Economy in Brief

German Financial Community a Bit Less Pessimistic About the Outlook
by Louise Curley February 12, 2008

The German financial community has become slightly less pessimistic. For the first time since May of last year, the ZEW (Center for European Economic Research, Manheim) indicator of sentiment for the next six months rose. The rise was a mere 2.1 percentage points to -39.5% from -41.6% in January. The measure is still at its second lowest value it its history. The long term average for the indicator is 30.7%.

While the participants in the survey were slightly less pessimistic about the future, they assessed the current situation much less positively. The excess of optimists over pessimists regarding the current situation fell 22.9 points from 56.6% to 33.7%. This was one of the largest declines ever recorded.

The absolute values for the appraisals of expectations and current conditions are shown in the first chart. Their month to month changes are shown in the second chart. Both charts cover the entire history of the indicators, so that the current values can be viewed in their historical perspectives. The appraisal of current conditions is slightly above its long term average while the appraisal of expectation remains among it lowest values.

In its press release, the Center for European Economic Research, interpreted the decline in the number of pessimists over optimists regarding the outlook as an indication that the current crisis is unlikely to develop into a downward spiral for the German Economy, rather it suggests that the economy might show some recovery by mid year.

ZEW INDICATORS   (Percent Balance) Feb 08 Jan 08  Feb 07  M/M  Dif  Y/Y Dif  2007 2006 2005
Expectations Six Months Ahead -39.5 -41.6 2.9 2.1 -42.4 3.0 22.3 34.8
Current Conditions                           33.7 56.6 70.9 -22.9 -37.2 75.9 18.8 -61.8
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