ZEW's first survey of 2024 found a surprising, albeit only very modest, deterioration in analysts' assessment of current conditions. However, this contrasts with a more marked improvement in the economic outlook. Versus market expectations, the results are similarly mixed.

The current conditions index dipped 0.2 points to minus 77.3, its first drop since last October but only a 2-month low. That said, the gauge remains historically very weak and nearly 62 points below its pre-Covid level. At the same time, economic sentiment (expectations) rose for a sixth straight month and, at 15.2, recorded its best reading since February 2023.

In line with recent months, the upswing in sentiment suggests analysts are taking on board the increasing prospect of ECB interest rate cuts and further falls in inflation this year. Even so, the low level of the current conditions measure suggests little optimism about the economy this quarter. None of this should come as a surprise to the ECB. Today's update puts the German RPI at minus 9 and the RPI-P at minus 3. Both measures show economic activity in general struggling to keep up with forecasts.

Current conditions are expected to rise to minus 76.0 in January from December's minus 77.1 which was lower than expected. Expectations (economic sentiment) are expected at 12.7 versus December's 12.8 which, by contrast with current conditions, was higher than expected.

The Mannheim-based Centre for European Economic Research (ZEW), asks German financial experts every month for their opinions on current economic conditions and the economic outlook for Germany (as well as other major industrial economies). The responses are synthesised into two simple indices that provide a snapshot of how the economy is seen to be performing.

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 around mid-month for the current 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.