Investor confidence in Germany improved unexpectedly in April and for a fifth consecutive month, revealing the strong positive sentiment among businesses over the country's economic prospects despite the lingering debt woes.
A survey by the Mannheim-based Centre for European Economic Research (ZEW) showed Tuesday that the indicator for economic expectations rose to 23.4 in April, the highest since June 2010, from 22.3 in March. Economists had expected the index to fall to 19.
Meanwhile, the indicator assessing the current economic situation rose to 40.7 in April from 37.6 in the previous month. It was expected to drop to 35.
The positive ZEW reading adds to recent encouraging signals from the German economy, ING Bank Senior Economist Carsten Brzeski said. "Both the ZEW and the Ifo index have been on a non-stop upward trend since the end of last year."
The March Ifo survey showed business sentiment rising for a fifth consecutive month to reach an eight-month high.
According to ZEW, the latest survey shows that the financial market experts in general expect a further positive development of the German economy during the next six months.
However, the sideward movement of the index in April shows that economic optimism suffers from considerable risks such as the economic slowdown of important trading partners, the rise of prices for crude materials and the sovereign debt crisis in the Eurozone, ZEW President Wolfgang Franz said.
The German economy contracted 0.2 percent in the fourth quarter, according to official data. The Organization for Economic Co-operation and Development forecasts 0.1 percent growth in the first quarter, with the pace expected to accelerate to 1.5 percent in the second quarter.
The European Commission sees 0.6 percent growth for Germany this year.
As a gauge of expectations among financial market participants, today's outturn seems surprising given recent concerns over the outlook for the Spanish economy, although the firmer reading could simply reflect residual optimism regarding the ECB's 3-year LTROs, Mark Miller, an economist at Capital Economics said.
The survey report noted that the economic expectations for the Eurozone increased 2.1 points to 13.1 in April. The indicator for current economic situation in the Eurozone decreased 0.6 points to minus 49.
Eurozone is seeking international support to increase its war chest to fight the debt crisis, which led the 17-nation economy to contract 0.3 percent in the fourth quarter of 2011. The economy is forecast to suffer a mild recession and is tipped to shrink 0.3 percent this year.
by RTT Staff Writer
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