A slight improvement in the ZEW (Germany's Center for European Economic Research) measure of the expectations of German investors and analysts for the economy in the next six months is bringing some cheer to the stock markets of Europe and the U. S. Although it was the first improvement after nine months of deterioration, it was hardly a ringing endorsement of confidence. It was a decline in the excess of pessimists over optimists regarding the economic outlook six months ahead that accounted for the improvement. Although the number of pessimists has declined they still exceed the optimists by 53.8% . The last time the excess of pessimists was this high was in the 2008 recession.

While expectations of investors and analysts have improved, if only slightly, their appraisals of the current situation have worsened. The excess of optimists regarding current conditions dropped to 26.8 in December from 34.2 in November. The ZEW measures of expectations and appraisals of current conditions for Germany are shown in the first chart. While the press has played up the slight improvement in expectations, the chart shows a picture reminiscent of the period preceding the 2008 Recession.

ZEW also publishes measures of expectations and appraisals of current conditions for the Euro Area. These are shown in the second chart. With Germany the largest member of the Euro Area, there is a tendency for it to dominate the expectations and appraisals of current conditions of the whole Euro Area . In fact the expectations for the whole Euro Area and for Germany tend to be similar as can be seen in the third chart. The appraisals of current conditions in the whole Euro Area and in Germany have also generally been similar, but since the recovery from the 2008 recession the German appraisal of its current conditions has been much more optimistic than that for the rest of the area.