Springing back to life

April 22, 2009

The steady stream of less-bad-than-expected economic data has evidently been working as a builder of optimism. Confidence in improved economies and financlal market conditions is growing.

One of the biggest surprises has been Germany’s ZEW economic sentiment survey — which polls analysts and economists in Europe’s largest economy. Not only did the index jump this month, it entered positive territory for the first time since July 2007. That was before the credit crisis hit.

U.S. financial services firm State Street also reports that the mood among institutional investors in North America, Europe and Asia is at a nine month high. The main point about this survey is that it is extraplolated from the actual buying and selling patterns within $12 trillion that State Street holds for investors as a custodian.

So, things are on the up. But would that not be expected given the huge amount of money being pumped into the world economy by governments and central banks? Or after global stocks have risen close to 30 percent on a period of about six weeks?

What is always unclear when it comes to sentiment indicators is whether they point to someting new or just reflect exisiting circumstances.

But maybe it does not matter. If people think that things are going to get better, doesn’t that just mean they are more likely to?

(Photo: Jeremy Gaunt)

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