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Economy in Brief
UK Consumer Sentiment Hits Lowest Reading since 1996
(when the GFK survey began; also lowest reading 'ever')
Of these 13 readings eight of them declined on the month in May three of them improved and two of them were unchanged...
U.S. Existing Home Sales Continue to Fall in April as Houses Become Less Affordable
The combination of soaring home prices across the nation and rising interest rates is making homes less affordable...
U.S. Index of Leading Indicators Fell in April
Five of the index's components fell in April, one was unchanged and four increased...
U.S. Unemployment Claims Rose in the Latest Week
The state insured rates of unemployment in regular programs vary widely...
CBI Gauge in the UK Continues to Be Upbeat
The global economy has a lot of challenges...
Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
Profits and Margins Plunge In Q1: Expect More Margin Contraction As Fed Squeezes Inflation
The Many Links of Inflation Cycle: Hard Landing Is Needed to Crack Them
Peak Inflation and Fed Policy: A Relationship which Should Worry the Fed and Scare Investors
Why Have the Yields on TIPS Been Negative in the Past Two Years?
by Louise Curley March 13, 2007
The ZEW Indicator of Economic Sentiment for Germany, which assesses the outlook in the next six months, based on the opinions of investors and analysts, rose 2.9 points in March to 5.8%. While the current level is a substantial improvement over the pessimism reached last November when pessimists exceeded optimists by 28.5%, it is well below the long term average of 33.2%. On the other hand, the fact that the participants became more positive during a survey period which included a sharp down turn in world stock markets and only a partial recovery, was in itself a pleasant surprise. Many observers had expected the indicator to decline.
The assessment of current conditions declined slightly to 69.2% from 70.9%, the first decline since June 2005. The indicators for the outlook and current conditions are shown in the first chart.
The ZEW Financial Markets Survey also asks its participants to report on the outlook and current conditions in the entire Euro Area. The assessment of the outlook for the entire Euro Area declined in March 5.1% from 6.8% in February and the appraisal of current conditions rose marginally from 66.7% in February to 66.9% in March. The indicators of current conditions and the outlook for the Euro Area are shown in the second chart.
The indicators for the Euro Area, of course, include those for Germany, but the differences between the indicators of the Euro Area and those of Germany can shed some light on the performance of Germany relative to the rest of the Euro Area. From the appraisal of current conditions in the total area and in Germany, we can infer that the participants had rated conditions in the Euro Area outside of Germany higher than those in Germany until November, 2006. Since then, the appraisal of current conditions in Germany has been higher than that for the whole region, as can be seen in the third chart. Similar inferences can be derived from the appraisals of the outlook in the two series. The outlook for Germany was less positive than that for the whole area indicator until about mid 2005 when it became more positive than the whole area indicator. It remained more positive from then until June 2006. After that until this March of this year, the German outlook for the German economy appeared to be much less positive than that for the Euro Area as a whole. The divergence may have been due, in part perhaps, to the prospect of the January 1, 2007 increase in Germany's VAT. Since the effects of the higher VAT appear to have been less onerous than expected, optimism in the German outlook has has become modestly more positive relative to the whole area, as can be seen in the fourth chart.
ZEW INDICATORS (% Balance) | Mar 06 | Feb 06 | Mar 05 | M/M DIF | Y/Y DIF | 2006 | 2005 | 2004 |
---|---|---|---|---|---|---|---|---|
Germany | ||||||||
Current Conditions | 69.2 | 70.9 | -8.4 | -1.7 | 77.6 | 18.3 | -61.8 | -67.7 |
Expectations 6 Months Ahead | 5.8 | 2.9 | 63.4 | 2.9 | -47.6 | 22.3 | 34.8 | 44.6 |
Eurostat | ||||||||
Current Conditions | 66.9 | 66.7 | 2.0 | 0.2 | 64.9 | 23.8 | -28.7 | -41.4 |
Expectations 6 Months Ahead | 5.1 | 6.8 | 61.1 | -1.7 | -56.0 | 26.6 | 32.3 | 52.1 |