what is the zew indicator of economic sentiment 
the zew indicator of economic sentiment is a simple sentiment indicator created out of the monthly zew financial market survey the zew financial market survey is an aggregation of the sentiments of approximately 350 economists and analysts on the economic future of germany in the medium term zew stands for zentrum f r europ ische wirtschaftsforschung which translates to the center for european economic research understanding the zew indicator of economic sentimentthe zew financial market survey covers a number of areas sectors and regions but only the questions related specifically to the german economy are used to create the zew indicator of economic sentiment from this data a simple indicator reading is given showing the difference between the number of analysts that are bullish on the german economy versus those who are bearish if the reading is a negative percentage it means the majority of analysts are bearish if the reading is positive it means the majority is bullish 1for example if 20 of respondents expect the german economic situation to deteriorate 30 expect it to remain unchanged and 50 expect it to improve then the zew indicator of economic sentiment would have a positive value of 20 this is a bullish reading and suggests that financial experts see positive signs for growth in the medium term as it is a sentiment indicator double digit readings are not uncommon in 2018 for example the zew indicator of economic sentiment went from a positive reading of 20 4 to 25 over a span of seven months during this time german economic growth slowed from 2 2 in 2017 to 1 5 in 2018 but the impact on the zew indicator of economic sentiment somewhat overstated the severity of this slowdown as sentiment indicators are known to do 2sentiment indicatorseconomic sentiment indicators are a popular means of gauging and forecasting trends in the economy and the markets various economic theories support the use of such indicators though they may otherwise disagree greatly in their assumptions and conclusions these include keynesian economics with its focus on investor and consumer psychology as fundamentally irrational driving forces of recessions and business cycles and rational expectations theory with its assertion that market participants in general use all available and relevant economic combined with a more or less accurate understanding of the structure of the economy to efficiently form rational expectations of future economic trends sentiment indicators usually take the form of surveys of opinions or intentions toward future actions and economic trends among various groups of people in the economy by surveying large numbers of people sentiment indicators are geared to leveraging the wisdom of crowds this is the idea that while individuals might often be mistaken the average thinking of a large number of people aggregates more dispersed information and is likely to be more accurate the groups surveyed may include investors ceos supply chain managers small business owners bank lending officers or consumers for example a survey of consumer sentiment might ask a sample of consumers whether they feel optimistic about the economy and whether they plan to make any big ticket purchases in the next six months some indicators are targeted at key participants who directly drive markets such as consumers and investors and some like the zew index of economic sentiment are targeted at experts who are expected to have better than average insight into future economic trends the data behind the zew indicator of economic sentimentas mentioned the zew indicator of economic sentiment takes the aggregate of around 350 economists and analysts sentiments to get a sense of germany s economic future these experts come from banks insurance companies and the financial departments of selected corporations they are asked about their expectations for the coming six months regarding the economy generally inflation rates interest rates stock markets exchange rates and oil prices the index itself is calculated as the percentage of experts who are optimistic regarding germany s economy in the next six months minus the percentage who are pessimistic for the german economy over that time period 1in addition to the questions about the german economy the zew financial market survey covers the economic futures of several other countries and regions including japan the united states the eurozone the uk france and italy 2