The ZEW index continued its recent downward trend in July, dropping for the third consecutive month. The ZEW index, which measures investors' confidence now stands at -19.6, down from -16.9 in June. At the same time, the current assessment component also dropped to 21.1, from 33.2. This is actually the lowest level since June 2010.
Latest stock market stabilisation, the ECB’s rate cut, the weaker euro exchange rate and lower oil prices have all not succeeded in brightening up German investors.
In the absence of other important macro data for the Eurozone and Germany this week, today’s ZEW index could get more market attention than normal. It will clearly add to growing concerns about the strengths of the German economy. However, throughout the financial crisis, the ZEW index has rather been a euro crisis thermometer than a good leading indicator for German growth.
Looking at the German economy, available monthly hard data so far look actually better than the latest drop of confidence indicators might suggest. Industrial production and private consumption have been rather stable in the first two months of the quarter and the export engine is still running smoothly. The economy has not yet escaped the risk of a contraction in the second quarter but a severe deterioration, as in most other Eurozone countries, should be avoided.