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Economy in Brief

Two Surveys Of German Economic Sentiment Show Significant Declines 
by Louise Curley June 9,2008

Two measures of Business Confidence in Germany were released today--the closely watched ZEW and the less well known DIHK. Both show a sharp loss of confidence in the outlook and a continued deterioration in the appraisal of current conditions.

The excess of pessimists among German institutional investors and analysts, represented in the ZEW measure, rose to 52.4% in June from 41.4% in May. The current excess of pessimists is the highest since October, 1992. In June of last year, there was an excess of optimists of 20.3% regarding the outlook. There is still an excess of optimists regarding current conditions. The percent balance in June was 37.6% down 1 percentage point from May, but down 51.2 percentage points from June 2007. The current conditions and expectations of the ZEW participants are shown in the first chart.

Among the members of the Association of German Chambers of Industry and Commerce (DIHK) there is still an excess of optimists, 6%, regarding the outlook but it is down 4 percentage points from February and 18 percentage points from June of last year. A similar trend is apparent in the appraisal of current conditions. The excess of optimists is down 6 percentage points from February and 11 points from June of last year. The current conditions and expectations of the DIHK members are shown in the second chart. (We have interpolated the data to show a smooth trend.)

The two surveys differ in sample size and in occupations. In June ZEW canvassed 264 individuals in the financial community while DIHK canvassed the 25,000 members of the Association of German Chambers of Industry and Commerce, 35% of whom were in industry, 6% in construction, 24% in wholesale and retail trade and 35% in services. ZEW surveys its members monthly while DIHK surveys its members three times a year in February, June and October. Because of the differences in timing, comparisons between the two series are not easy. If we aggregate the ZEW data to a quarterly basis and compare it to the interpolated series of the DIHK data we have a rough comparison. For what is worth, the rough comparison between the appraisals of current conditions in the two series shows a close correlation, but the rough comparison between the appraisals of expectations in the two indicators shows very little correlation as can be seen in the third and fourth charts.

GERMANY: CONFIDENCE INDICATORS  Jun 08 May 08  Jun 07  M/M Chg Y/Y Chg 2007 2006 2005
ZEW Indicator (% balance)
Current Conditions  37.6 38.6 88.7 -1.0 -51.1 75.9 18.3 -61.8
Expectations  -52.4 -41.4 20.3 -11.0 -72.7 -3.0 22.3 34.8
DIHK Indicator (% balance) Jun 08 Feb  08  Oct  07  Jun 07 Feb 07 Oct 06 Feb to
June Chg
Y/Y Chg
Current Conditions  24 30 31 35 36 24 -6 -11
Expectations 6 10 15 24 17 9 -4 -18
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