ZEW and ifo Surveys

The release

How it is measured.

ZEW, a research institute in Mannheim, asks financial market experts whether they expect the economy to improve or worsen over the next six months; the indicator is the share of optimists minus the share of pessimists, with zero as neutral. The ifo Institute in Munich asks several thousand firms in manufacturing, services, trade and construction to assess their current situation and their expectations for six months ahead; the business climate is an average of the two, published as an index against a base year.

Why markets watch it.

Germany is the largest economy in the euro area and a large exporter, so its surveys are read for the region as well as the country. They arrive in the second half of each month, ZEW first, before most official figures for that month.

How it is commonly misread.

The two are not versions of one thing. ZEW polls people who watch markets, so its expectations often echo what share prices and the news did in the previous weeks; ifo polls the firms themselves. Their scales also differ: one is a balance around zero, the other an index around a base level, so the numbers cannot be compared. Both describe Germany, not the euro area.

An explanation of why the release is followed, not a view on what any market will do when it is published. Educational information, not investment advice or a recommendation to trade.