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Economy in Brief

The Financial Community in Germany and Economy Watchers in Japan Are a Bit less Pessimistic about Their Economies
by Louise Curley March 11, 2008

Economy Watchers in Japan and the financial community in Germany (as represented by participants in ZEW Survey) are still deeply concerned about the prospect for the future of their economies. The first and second charts show measures of the future outlook in both countries relative to their long term averages.In Germany, the excess of pessimists over optimist in March was 32.0 percentage points compared with a long term average of and excess of optimists over pessimists of 30.3 percentage points. In Japan, the diffusion index in February was 33.6 compared with a long term average of 47.6.

The latest reports, however, suggest that they are beginning to see some slight grounds for optimism. In Japan, the Economy Watchers' diffusion index of current conditions in February rose 1.6 points from January and the diffusion index of future conditions rose 3.7 points. In Germany the financial community continues to downgrade its appraisal of current conditions. The excess of pessimists over optimists appraising the current situation increased by 1.6 percentage points from February to March. However, the excess of pessimists regarding the outlook six months ahead fell by 7.5 percentage points. The third and fourth charts show the appraisals of current condition and the outlook for Germany and Japan.

GERMANY ZEW INDICATORS (% BALANCE) Mar 08 Feb 08  Mar 07  M/M Dif  Y/Y Dif  2006 2005 2004
Current Conditions 32.1 33.7 69.2 -1.6 -37.1 75.9 18.3 -61.8
Expectations 6 Months Ahead -32.0 -39.5 5.8 7.5 -37.8 -3.0 22.3 34.8
JAPAN ECONOMY WATCHERS SURVEY (DIFFUSION INDEXES) Feb 08 Jan 08   Feb 07  M/M Dif  Y/Y Dif  2006 2005 2004
Judgment of Current Conditions 33.6 31.8 49.2 1.80 -15.6 44.9 51.4 50.3
Judgment of Future Conditions 39.5 35.8 52.1 3.70 -12.60 46.9 52.9 51.5
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