Confidence in the Future among German Investors and Analysts Dips Sharply

Confidence among the German investors and analysts who participate in the ZEW survey, deteriorated sharply in August. Those expecting economic conditions to worsen six months from now outnumbered those expecting improvement by 5.6% in contrast to July when the optimists outnumbered the pessimists by 15.1%. The decline in sentiment was not only greater than the consensus had expected, but has brought confidence to a level well below the long term average (35%) as can be seen in the first chart.

While becoming more pessimistic about the outlook, these same investors and analysts continue to view current conditions more favorably. In August, those viewing current conditions as "good" outnumbered those viewing current conditions as "bad" by 33.6% versus 23.3% in July. July was the first month since early 2001 in which the appraisal of current conditions was better than that of expectations. In general the investors and analysts tend to be more optimistic about the future than they are about present conditions as can be seen in the second chart.