Germany's investor confidence deteriorated for the second straight month in February, reversing the improving trend seen in recent months, amid concerns over the faltering recovery in emerging market economies and the subdued outlook for the U.S. recovery.
The indicator of economic sentiment, which measures investors' views of the economy over the next six months, dropped to to 55.7 in February from 61.7 in January, data from the latest survey by the Centre for European Economic Research/ZEW revealed on Tuesday.
Economists had expected the score to drop modestly to 61.5. The index, however, continued to stay well above its historical average of 24.5.
According to ZEW, the fall in confidence mainly reflects renewed concerns over the strength of the recovery of the U.S. economy, as well as uncertainties in certain emerging markets regarding their economic prospects in the medium term.
On the other hand, the indicator of experts' assessment of the current economic situation climbed to 50 in February from 41.2 in January, and hit the highest level since August 2011. The economists' forecast was for a reading of 44.
The expectations index for the the Eurozone dropped 4.8 points and reached 68.5 in February. Meanwhile, the current situation index for the euro area improved by 8 points to -40.2.
According to Capital Economics economist Paul Hollingsworth, the latest ZEW survey gives mixed signals, suggesting that whilst the economic situation is improving slowly, investors are losing some optimism about the future.
The findings of the ZEW survey are consistent with the renewed contraction in Germany's industrial production at the end of last year, and the unexpected fall in new business orders.
Figures published by the government this month showed that industrial output dropped 0.6 percent sequentially in December, following November's 2.4 percent increase. New orders declined 0.5 percent month-on-month in December, reversing the previous month's 2.4 percent increase.
Economic growth in Europe's largest economy accelerated modestly in the fourth quarter, driven by positive contributions from foreign trade and investment. GDP grew 0.4 percent from a quarter ago, when it recorded a 0.3 percent gain.
Earlier this month, the German Economy Ministry upgraded its growth outlook for this year to 1.8 percent from 1.7 percent, indicating a marked improvement from last year's 0.4 percent expansion. In 2015, growth is seen picking up further to 2 percent.
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