German investor confidence index posts fifth straight gain

German investor confidence rose slightly for the fifth straight month in March, a closely watched survey showed Tuesday, brightening the outlook for Europe's biggest economy.

German investor confidence index posts fifth straight gain
Photo: DPA

The ZEW confidence indicator rose by 2.3 points to minus 3.5, slightly worse than the expectations of analysts surveyed by Dow Jones Newswires, who forecast a gain to minus 2.8 points.

The index, which is watched for future economic trends, had gained 25.2 points in February, leading some to perceive a glimmer of hope for Germany’s economy.

Nevertheless, the institute pointed out that the index was still “well below” its historical average of 26.2 points.

“According to financial market experts, the economic slowdown is gradually phasing out. The bottom of the recession is likely to be reached this summer,” said ZEW president Wolfgang Franz in a statement.

He added: “The economic situation is extremely bad, but there are the first signs of hope. They should not be played down.”

Germany is facing its worst recession in six decades with Berlin expecting output to shrink by 2.25 this year, a forecast deemed too optimistic by many economists.

The ZEW said recent interest rate cuts by the European Central Bank, as well as lower prices for oil and raw materials might explain investors’ continued confidence.

The ECB cut borrowing costs to a new low in March. Interest rates now stand at 1.50 percent.


German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.