German Investors And Analysts Become Less Positive On The Outlook

German investors and analysts have become somewhat less positive about the economic outlook, six months ahead. In the July survey of the financial community by the ZEW institute, the excess of optimists over pessimists regarding the economic outlook dropped to 39.5% from 44.8% in June. It is not surprising that some of the participants in the survey may be becoming more cautious about the recovery after the rapid decline of pessimists and the rapid rise of optimists that has taken place since the low of last July. The swing from the majority of pessimists in July 2008 to the majority of optimists in June was 108.7 percentage points. With the decline in optimists in July, the swing is still large at 103.4 percentage points. Moreover, the July excess of optimists of 39.5 % is still well above the long term average of 26.3%.

Pessimists in the financial community continue to dominate the optimists regarding the current economic situation. In July, although slightly improved from the June figure of 89.7%, the excess of pessimists was 89.3%. Expectations and appraisals of current conditions are shown in the first chart.

Among the factors that may have influenced the participants in the July ZEW survey are their profit expectations. In the July survey, they expect a detererioration in profits for the banking and insurance industries, the first deterioration since January, 2009. While the expectations of profits in the producing industries, such as machinery, metals/steel and electronics are expected to show some improvement, profits in consumption and trade are expected to decline slightly. Profit expectations that are expected to increase and those that are expected to decrease are shown in the second and third charts.