Germany's economic confidence strengthened more sharply than expected in January to the highest level since May 2010, as financial experts saw the prospects for the economy brightening up on a six months time horizon, a closely watched survey showed Tuesday.
The economic sentiment index surged 24.6 points to 31.5 in January, far exceeding the expected reading of 12, data from the Center for European Economic Research/ZEW showed. At the same time, the assessment of the current economic situation improved slightly by 1.4 points to 7.1.
"The financial market experts seem to expect that the positive sentiment on the financial markets may soon result in companies realizing investments that had been postponed earlier on," says ZEW President Wolfgang Franz.
Nonetheless, the economic situation of major trading partners is rightly considered to still be weak. This indicates that the German economy will further grow at a moderate level this year, Franz noted.
In its monthly report, Bundesbank on Monday said that Germany's economic slowdown is likely to be short-lived as the biggest euro area economy's prospects have improved at the beginning of the year.
The German economy contracted 0.5 percent in the final quarter of 2012. Both central bank and government forecast 0.4 percent growth for 2013.
Commerzbank analyst Ralph Solveen said the jump in the January reading reflects sentiment of analysts rather than companies. This improvement in confidence in the markets and by extension in the media will help to lift some of the uncertainty among companies, the analyst added.
Further, the survey showed that economic expectations for the Eurozone also increased significantly in January, by 23.6 points to 31.2 points. The current assessment index came in at -75.3 points, up 4.6 points from the prior month.
by RTT Staff Writer
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