Germany optimism on upward trajectory

But are analysts getting ahead of themselves?

Many analysts eagerly await the release of a key measure of German institutional sentiment known as the ZEW Indictor of Economic Sentiment.

For June, the indicator increased by 13.7 points to 44.8 and is holding above the historical average of 26.3 points. In my opinion, there appears to be a disconnect due to the turmoil the German economy is still dealing with.

ZEW Indicator of Economic Sentiment for Germany

Rising, or maybe a better word “soaring,” sentiment among institutions is a welcome development.

But I have to caution that industrial production and incoming orders are not yet headed higher – Germany is oriented toward manufacturing and has been hit very hard by the drop in global demand – and most economists do not see an upturn in Europe until early next year.

Plus, sentiment bottomed out in October just as GDP was poised to drop at its worst pace on record. The ZEW missed that one.

Though the survey is well-respected and gets plenty of attention in the financial community, I think the analysts surveyed are getting a little carried away. I prefer the IFO Business Climate Index, which hit bottom in March.

Your opinions are welcome.

Separately, a look at today’s US economic data is available on my homepage at Examiner.com. A summary is available below.