- POSTED: 17 Sep 2013 21:51
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Investment sentiment in Germany rose to its highest level in three-and-a-half years this month, data showed Tuesday, fuelling optimism that Europe and its biggest economy are in recovery.
FRANKFURT: Investment sentiment in Germany rose to its highest level in three-and-a-half years this month, data showed Tuesday, fuelling optimism that Europe and its biggest economy are in recovery.
The widely watched investor confidence index calculated by the ZEW economic institute rose by 7.6 points to 49.6 points in September, the institute said in a statement.
That was fractionally higher than analysts' forecasts for an increase to around 49 points this month, and was the highest level since April 2010.
"Financial market experts hold the view that the German economy is still gaining momentum. In particular, the experts' economic optimism has increased due to the improved economic outlook for the eurozone, although recently released economic data for Germany have fallen short of expectations," said ZEW president Clemens Fuest.
For the survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.
The sub-index measuring financial market players' view of the current economic situation in Germany rose by 12.3 points to 30.6 points in September, its highest level since June 2012.
A frequent criticism of the ZEW index is that it can be volatile and is therefore not particularly reliable.
Natixis economist Johannes Gareis said investors had taken heart from the fact that the 17-country eurozone emerged from a record recession by notching up growth of 0.3 per cent in the second quarter.
Nevertheless, recent "rather weak hard data -- notably factory orders, industrial output and foreign trade -- paint a slightly different picture of the German economy," Gareis cautioned.
Capital Economics economist Ben May was also sceptical.
"The healthy monthly rise in the German ZEW index suggests that the economic recovery continued in the third quarter, but we doubt that growth will have been as strong as in the previous quarter," when the German economy registered 0.7 per cent growth, he said.
"The index has not been a very reliable predictor of (economic growth) in the past and other indicators point to a more modest recovery. Overall, we continue to expect the German economy to expand by around 0.5 per cent this year and to grow by a below consensus 1.0 per cent or so in 2014," May said.
Annalisa Piazza at Newedge Strategy said the "signs of a modest recovery in the eurozone and the super-accommodative monetary policy seem to have offset risks coming from the uncertain geo-political situation and choppy equities in late August.
"That said, we rule out that the index will continue to accelerate at the recent pace in the coming months as hard data for early third quarter have been more mixed, still signalling downside risks for growth," Piazza said.
Postbank economist Thilo Heidrich was more optimistic.
"In all, the ZEW data provide a further indication that the Germany and eurozone economies are on the path of recovery," he said.
"After the eurozone emerged out of its long recession in the second quarter, the signs are favourable for a continuation of the recovery," Heidrich said.
Nevertheless, he added, with many eurozone countries still faced with structural problems, "we assume that the recovery will be slow. Germany should see stronger growth, however."