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German Investor Confidence Climbs To 4-year High

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German investor confidence rose to its highest level in four years in November, driven by hopes of economic recovery gaining momentum in the euro area, the results of a closely-watched survey showed Tuesday.

The indicator of economic sentiment for Germany rose for the fourth consecutive month to 54.6 from 52.8 in October, the Mannheim-based Centre for European Economic Research/ZEW said. Economists had forecast a score of 54. The latest reading is the highest since October 2009, the ZEW said.

"The end of the US government shutdown blues, the Eurozone stabilisation, the ECB's rate cut and the latest stock market rally seem to have heeded analysts' optimism," ING Bank Senior Economist Carsten Brzeski said.

Meanwhile, the current conditions index dropped for a second successive month, down to 28.7 from 29.7, in contrast to expectations of an improvement to 31.

At the same time, economic expectations for the Eurozone have increased slightly in November, with the corresponding index climbing to 60.2 from 59.1. The indicator for the current economic situation shed 0.7 points to minus 61.6.

"Economic expectations for Germany have been hovering at a high level for months," ZEW President Clemens Fuest said. "The slightly improved economic outlook for the Eurozone might have contributed to this development."

However, analysts were less upbeat and pointed out that the ZEW index was not the best indicator to track the economic activity in the biggest Eurozone economy. They also drew attention to the sustained decline in the current conditions index.

"This might suggest that the pace of recovery has slowed a bit further after the acceleration seen over the summer," Capital Economics Chief European Economist Jonathan Loynes said.

"The overall message appears to be that, while the German (and the euro-zone) economies continue to grow, they do not appear to be accelerating to the sort of pace which might start to have a beneficial impact on the beleaguered peripheral countries."

Economists prefer to wait till the release of the results of the purchasing managers' survey and Ifo survey later this week to get a clearer picture of the German economic activity.

Germany's GDP growth slowed to 0.3 percent in the third quarter from 0.7 percent in the previous three months. Positive contributions were made only by domestic demand in the third quarter of 2013 and the balance of exports and imports had a downward effect on GDP growth.

Recently, Germany came under severe criticism from the EU and the U.S. for relying heavily on exports to boost its economic growth. The nation was urged to increase its domestic consumption and wages for achieving higher growth.

"The German economy continues to benefit from low interest rates, strong labour market, solid domestic demand and the improved outlook for external demand," ING Bank's Brzeski said.

"With the US leaving its government shutdown blues behind, at least until the end of the year, peripheral Eurozone countries stabilising further and China rebalancing its growth model, the recently criticized export sector should flourish again."

The Organizaton for Economic Co-operation and Development said in a report today that it sees a gradual recovery in the euro area. The Paris-based think tank forecast the eurozone to grow 1 percent in 2014 and by 1.6 percent in 2015.

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