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German ZEW Economic Confidence Strongest Since Early 2018

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Germany's economic sentiment strengthened notably to the highest level in 22 months in December as strong exports and labor market conditions boosted expectations among financial experts, survey data from the ZEW - Leibniz Centre for European Economic Research in Mannheim showed on Tuesday.

The ZEW Indicator of Economic Sentiment rose to 10.7 in December from -2.1 in November. This was the highest reading since February 2018, when the score was 17.8. The score was also well above the forecast of 3.5 points.

The indicator for the current situation improved to -19.9 from -24.7 in the previous month. Economists had forecast the index to climb moderately to -22.0.

The renewed substantial rise in sentiment may seem surprising, ZEW President Achim Wambach said. It rests on the hope that German exports and private consumption will perform better than prior estimates.

This hope results from a higher than expected German foreign trade surplus in October, alongside relatively robust economic growth in the EU in the third quarter and a stable German labor market, he noted.

"The rather unfavorable figures for industrial production and incoming orders for October, however, show that the economy is still quite fragile," Wambach added.

Sentiment concerning economic development in the euro area also improved considerably at the end of the year. The economic confidence indicator advanced 12.2 points to 11.2 in December. Likewise, the current economic situation index rose 4.9 points to -14.7.

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