Germany’s ZEW Sentiment Indicator – Things Are Looking Up

Today’s big market rally is, at least in part, due to the very positive ZEW reading in Germany.  The leading indicator posted a positive result for the first time since May 2012 and provided a glimmer of hope for the European economy (here’s more via ZEW):

“The ZEW Indicator of Economic Sentiment for Germany has increased by 22.6 points in December 2012. It now stands at a level of 6.9 points. Thus, the indicator is now on positive territory for the first time since May 2012.

The indicator’s rise shows that the financial market experts expect the economic activity to stabilize until early summer 2013. Positive U.S. economic data may have contributed to this assessment. They may have spurred the hope that the global economy will gain momentum. Nevertheless, keeping in mind that the Indicator of Economic Sentiment currently hovers only marginally above the zero points-line, the German economy is rather likely to bottom out instead of already experiencing an upswing within the next six months.

“The financial market experts forecast the development of the economic activity in 2013 with pre-Christmas optimism. Although the cooling down of the economic activity will last until the beginning of 2013, Germany will not have to face a recession. However, this only applies if the crises in the eurozone do not deepen once again,” says ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz.”

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. “The indicator’s rise shows that the financial market experts expect the economic activity to stabilize until early summer 2013.”

    This indicator is based on “financial market experts’” perception of the economy and is a better gauge of the stock market sentiment than the real economy (for that better use Ifo or the Markit PMI). Now there is of course some feedback from the stock market to the economy, otherwise why would CBs do QE…