Following the previous month's jump from 39.5 to 56.1, the expectation component of the ZEW survey improved only slightly to 57.7. This was clearly below the market's expectation of 60 and implies a significant slowdown of the previously rapid increase. The assessment of the current situation behaved in a similar way, improving from -77.2 to -74 (expected: -67.5).

Expectations had often been helpful in the past in anticipating the future path of the economy (as seen for industrial production; see chart). During the last few months, though, the ZEW index had increasingly decoupled from the economic data and rose - hand in hand with equity markets - surprisingly fast. A slowdown of the dynamics is thus in line with the latest reading of industrial production. Markets have barely reacted to today's release. The euro weakened slightly vs. the US dollar, which might have been caused by the less optimistic than anticipated economic expectations.

2009-09-15 SN EUL e