The June ZEW survey shows analysts becoming rather more cautious about both the current state of the German economy as well as its medium-term outlook.
At 62.9 the current conditions gauge was 2.8 points short of its May reading and at a 3-month low. Expectations remained on the downtrend that started in April. A 10.4 point drop lifted the cumulative decline since the end of last quarter to 23.3 points to leave the index at 31.5, its weakest level since last November.
Recent, disappointingly sluggish economic news at home together with a Greek financial crisis that finally seems to be reaching a climax seem to have weighed on sentiment this month. That said, both measures remain at historically high levels so there is nothing here to suggest that German growth is about to dry up.
Nonetheless, the June results provide another reminder of the need for the ECB to retain a highly accommodative monetary policy until such time as the Eurozone recovery becomes a good deal more solidly established.
The monthly survey, conducted by the Mannheim-based Center for European Economic Research (ZEW), asks German financial experts for their opinions on current economic conditions and the economic outlook for Germany as well as other major industrial economies.
The ZEW Indicator of Economic Sentiment is calculated from the results of the ZEW Financial Market Survey. The ZEW is followed closely as a precursor and predictor of the Ifo Sentiment Survey and as such is followed closely by market participants. The data are available the second week of the month for the preceding month. The survey provides a measure of analysts' view of current economic conditions as well as a gauge of expectations about the coming six months. The latter measure tends to have the larger market impact and reflects the difference between the share of analysts that are optimistic and the share of analysts that are pessimistic. About 350 financial experts take part in the survey.
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