The ZEW indicator of European and German economic sentiment for July 2016 has fallen sharply to the previous month, clearly reflecting Post-Brexit uncertainty.
The centre for European Economic Research, located in Mannheim, Germany, published its survey data reflecting European institutional investor sentiment for this month early this morning. The survey indicators measure differences between shares of investors who are optimistic and shares of analysts who are pessimistic.
Experts expected indicators for this month to be lower the month before, due to the effects last month’s Brexit vote has had on the markets and investor confidence. However, the readings missed even most pessimistic expectations.
Germany
The ZEW indicator for economic sentiment in Germany in July dropped a staggering 26 points from 19.2 all the way to minus 6.8. This is the lowest reading since November 2012 and represents a great shift in economic sentiment with more investors being pessimistic than optimistic about the economic future following last month’s UK vote to leave the European Union.
The overall assessment of the economic situation in Germany has also fallen from 54.5 to 49.8. This is a level 2.2 points lower than expected and further represents the rising doubtful view by investors which is likely to have bearish influence on the Euro.
Euro Zone
The indicator on economic sentiment within the European Monetary Union has also fallen greatly from 20.2 to minus 14.7. This is a full 27 points lower than expected.
European economic sentiment has been effected far more strongly by recent events installing uncertainty in financial markets, most notably the Brexit vote. Levels of pessimism of investors are now at levels as low as in the Euro Crisis in late 2012, but it remains to see if these outcomes simply represent investors short term response to the shock of the unexpected decision of the UK or long term changes in economic sentiment.
