Barclays Capital ZEW German Economic Sentiment Index -- Bearish

The ZEW German economic sentiment index fell to -55.2 in November from -48.3 in September, below our forecast (-52.0) and consensus (-52.5). The current reading is far below the long-term average of about +25 points and reflects the very low expectations of the financial experts taking part in this survey for German economic activity over the next six months.

The ZEW's current situation index declined from 38.4 in September to 34.2 and the gap between sentiment and the current situation remains large. Current readings are now very close to those in June 2008, before the current situation index went into free fall and a sharp recession followed. The ZEW said that "world trade is weakening and the public debt problems in the Eurozone and in the US weigh heavily on business activity. These risks could even gain more importance and thus could further harm economic growth in Germany."

In our view, these figures underline the very pessimistic outlook of financial sector experts which is increasingly shared by others and clearly shaped by the sovereign debt crisis in the euro area. They point to growing risks to our German GDP Q4 forecast of only a slight contraction in Q4 GDP by 0.1% q/q.