ZEW Indicator of Economic Sentiment: what financial analysts expect for Germany

What the ZEW measures

Analysts and economists at banks, insurers and companies answer whether they expect the German economy to improve, stay the same or deteriorate over the next six months. The sentiment indicator is the difference between the shares of optimists and pessimists, so it can be negative. A separate question gives their assessment of the current situation, and similar indexes cover the euro area.

Because respondents are financial professionals, the ZEW partly reflects market conditions themselves: rising equity prices and falling bond yields can lift expectations. That makes it faster to turn than company surveys, and sometimes noisier.

How traders read it

• Expectations: the headline, watched for turning points in the European cycle.
• Current situation: a check on whether expectations are running ahead of actual conditions.
• Gap between the two: a large gap between improving expectations and a weak current situation has been read as a sign of an anticipated recovery.
• Comparison with the ifo, published later, which surveys companies rather than analysts.

Why futures react

A surprise in German sentiment shifts growth expectations for the euro area and, marginally, expectations for ECB policy. 6E reacts through the relative rates channel and through flows into European assets; German equity and bond futures react directly. The survey's early timing in the month gives it weight when there is little other European data.

Order flow at 11:05 Frankfurt time

The release lands in the European late morning, which is the US overnight session. 6E and European futures trade with European participation; the ZEW usually produces a single bar with a burst of aggressive volume and limited follow-through. The release minute, 11:05 rather than a round hour, is worth noting: a bar at 11:00 that moves is not the ZEW.

Because the survey reflects market sentiment, a strong reaction is more likely when the ZEW confirms a move already under way in European assets than when it contradicts one.

In Senzoukria

ZEW rows appear in the News calendar under EU. Rows naming ZEW are described as “German business survey — EUR/bunds driver.” The event detail converts the release time into Chicago and UTC, which matters for a release scheduled at an unusual minute.

On the chart, the “Highlight macro release times” option colours the time-axis label carrying the release, so an 11:05 event does not get confused with a round-hour bar on a 6E chart.