Global| Feb 19 2013Zew Jumps
Summary
The Zew expectations reading jumped in February to 48.2 from 31.5. This near-neutral reading (a reading of 50 would balance positive with negative expectations) stands in the 36th percentile of its historic queue of net readings; it [...]
The Zew expectations reading jumped in February to 48.2 from 31.5. This near-neutral reading (a reading of 50 would balance positive with negative expectations) stands in the 36th percentile of its historic queue of net readings; it is stronger than this only 36% of the time. The current conditions index fell to 5.2 from 7.1 and it is also in the 36th percentile of its historic queue. One year ago the expectation index was higher 74% of the time, a much lower standing but the current reading was higher, as it was stronger only 15% of the time. Things have changed a great deal in a year.
The Zew index is transitioning from its weak phase to a stronger phase. The 'net readings' on the two indices have crossed over with the expectations reading now higher than the current reading for a number of months (the zeros on the two scales line up). Despite the slippage in the current index the strong rise in the expectations index is a sign that the economy is really expected to transition to better growth.
The Bundesbank has in fact just announced that it expects the German economy to avoid recession.
Even so the Zew financial experts' ratings on stock and bond investments both slipped slightly this month. But the downward current index has been an important negative signal- often a leading signal for the German stock market. The current divergence between the Zew current index and the Dax is a remarkable historic event against the context of its past relationship. The two series have moved at very different speeds but not in different directions- not for this long. Although the rising expectations index gives DAX investors some comfort, in the past 10 years there has never been such a divergence as this between the Dax and the current Zew index.
| ZEW Economic Index for Germany | |||||||
|---|---|---|---|---|---|---|---|
| Level of Zew Index | Averages | ||||||
| Feb-13 | Jan-13 | Dec-12 | Yr Ago | 3-mo | 6-mo | 12-Mo | |
| Current | 5.2 | 7.1 | 5.7 | 40.3 | 6.0 | 7.7 | 20.1 |
| Expectations | 48.2 | 31.5 | 6.9 | 5.4 | 28.9 | 6.9 | 3.0 |
| Percentiles | |||||||
| Current | 54.6 | 55.6 | 54.8 | 73.1 | -- | -- | -- |
| Expectations | 73.0 | 62.1 | 46.1 | 45.1 | -- | -- | -- |
| Percentiles are readings in this period as a percentile of the full range of values back to 1/92 | |||||||
| Count Percentiles reading is stronger than this 'XXX' percent of the time... | |||||||
| Current | 36.1% | 34.1% | 35.1% | 15.8% | -- | -- | -- |
| Expectations | 36.1% | 47.8% | 71.4% | 74.2% | -- | -- | -- |
Robert Brusca
AuthorMore in Author Profile »Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.
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