Balance Of Opinion Of Germany's Financial Experts Turn Negative On Outlook

Pessimists concerning the outlook for the next six months among German institutional investors and analysts now outnumber optimists for the first time since March of 2009. In September the ZEW indicator fell to -4.3% from 14.0% in August and was 62 percentage points below September of last year. At the same time, these financial experts have become more positive concerning current conditions. The balance of optimists over pessimists rose to 59.9% in September from 44.3% in August. The indicators for the outlook and current conditions are shown in the first chart.

While more of the financial experts continue to expect industry profits to improve than those who expect profits to decline, they appear to be less certain of this outlook for the banking, insurance, automobile, chemical/pharmaceutical, steel, electronics, mechanical engineering, construction, services and information technology where the excess of optimists over pessimists declined. The three industries where the excess of optimists over pessimists has increased are utilities, telecommunications and, surprisingly, consumption/trade. These are shown in the second chart.

The survey was taken during the period from August 30 to September 13. Until the end of this period, most of the economic news, that for German industrial production and new orders, for example, was down beat. In addition, stimulus measures in Europe and elsewhere were winding down, governments were beginning to put more emphasis on their budgetary imbalances and the financial problems in Greece, Portugal, Ireland and Spain persisted. As an indication of euro area crisis, the third chart shows the yields on 10 Year government bonds in Greece, Portugal and Ireland compared with Germany. The spreads remain high. While these factors are likely to continue to color the views of the financial community, should the more positive news from the U.S. and China that occurred at the very end of the period continue there could be a lessening of the current pessimism.