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Economy in Brief

German Financial Experts A Little Less Optimistic
by Louise Curley October 13, 2009

The German financial community lowered slightly its expectations for the economic outlook.  The ZEW indicator of economic expectations declined slightly in October to 56.0% from 57.7% in September.  This is still well above the long term average of 26.7%.  Their assessment of current conditions was, however, slightly less pessimistic in October, -72.2%, than it was in September -74.0%. The decline in optimism was the second decline this year.  In July, the excess of optimists in regard to the outlook declined to 39.5% from 44.5% in June, a more substantial decline than the present one.  The indicators of current conditions and expectations are shown in the first chart. There survey was conducted between September 28 and October 12.  288 institutional investors and analysts participated.

A number of factors could account for the caution about the outlook expressed by the participants in the survey.  The economic news from Germany in recent weeks has been mixed.  Industrial Production and New Orders continued to be positive, but exports declined in August and retail trade has shown little strength as seen in the second chart. (Exports have been expressed as an index for comparability.)

The Press has highlighted the decline in expectations, but ZEW's President, Wolfgang Franz, down played the decline. According to him,  "The assessment of the financial market experts reflects the prevalent view.  The economy will improve only gradually." 

ZEW INDICATORS (Percent Balance) Oct 09 Sep 09 Aug 09 Jul  09 Jun 09 May 09  APR 09  Mar 09 
Current Conditions -72.2 -74.0 -77.2 -89.3 -89.7 -92.8 91.6 -89.4
Expectations 56.0 57.7 56.1 39.5 44.8 31.1 13.0 -3.5
                 
Exports  (2005=100) -- -- 102.9 104.5 102.8 96.6 96.2 101.1
Retail Trade  (2005=100)  -- -- 98.2 100.0 99.3 100.1 101.2 99.7
Manufacturing New Orders  (2005=100) -- -- 91.3 89.7 87.9 84.4 81.3 91.9
Industrial Production  (2005=100) -- -- 64.3 92.7 93.7 92.8 88.7 91.3

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