German Investors Becoming More Confident

The ZEW indicator of German Investor Confidence rose to 60.9.in September from 52,5 in August to reach its highest level since July 2002. Investors tend to appraise the future outlook positively. Rarely has the index been in negative territory when pessimists outweigh optimists. Over the long run, the average for the ZEW index is 33.

Although the ZEW index is an indicator of economic growth in the next six months, there are, currently, signs that economic activity is beginning to stabilize, if not actually to pick up after the GDP declines of 0.2% in the first quarter of the year and 0.1% in the second quarter. Industrial production, excluding construction, rose 2.18% in July and was slightly above a year ago. Construction was up 3.69% but was still below a year ago. Domestic new orders in manufacturing rose 1.54% in July, and they, too, remained below levels of a year ago. While these signs are encouraging. so far there are few signs of increased demand from consumers and foreigners. Foreign demand, however, may improve with increased activity in the U. S. and Japan and a more favorable Euro.