Institutional investors and analysts in Germany have become slightly less pessimistic. The December ZEW indicator showed that the balance of optimists over pessimists was 14.4%, 0.5 percentage points above November, The increase is hardly significant. The best interpretation may be to say that confidence has stopped declining.

The balance of optimists over pessimists remains well below the long run average of 34.5%. Moreover, the balance is 59 points below its December 2003 value. The recent peak in the balance was 48.4% in July. The indicator has been trending down since then with ever increasing differences from a year ago, as can be seen in the first chart.

The decline in confidence has been attributed, in large part, to the increases in oil prices and in the euro. The weekly value of the euro in terms of the dollar and the weekly price (dollars per gallon) of Brent Crude oil for the past two years are shown in the second chart. Both have risen relentlessly since the beginning of this year through October. The euro has since continued to climb, but the price of oil dipped 14% from the last week in October to the last week in November and may have contributed to the slight increase of optimists over pessimists in the December ZEW survey of institutional investors and analysts.