Economic outlook deteriorates markedly according to ZEW

The economic forecasting for Germany by the Centre for European Economic Research (ZEW) has been less promising for July 2006 with a fall of 22.7 points to 15.1 points on the rating scale as compared to the previous month (37.8 points in July). Above all economic development in Germany is put at risk by the rapidly growing oil price. Furthermore it is expected that exports are going to lose momentum over the next six months due to a weakening US economy and a strong European currency. It is rather unlikely that this development could be compensated for by domestic demand given that there will be a VAT increase next year. “The repeated reduction in ZEW´s economic indicator is a clear sign for the government´s reform policies not meeting expectations so far. German citizens have to face new financial burdens without the reforms being successful, let alone their being realized”, says Prof. Dr. Wolfgang Franz who is the ZEW´s chairman.

On the other hand, following a very promising development of industrial production in Germany, financial experts consider the economic situation to continue its upward trend also in the current month. Thus, their indicator for the economic situation rises from 11.9 points in June to 23.3 points this month.

The forecast for the economic development in the Euro-zone, however, is down in July. The current Euro indicator loses 19.2 points against the previous month and now stands at 18.1 points whereas the indicator for the current economic situation is up by 10.4 points at 25.9 points.

In the survey which was part of the ZEW´s financial market test and lasted from June 26th to July 17th 2006 participated 293 analysts and institutional investors. GERMAN