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Investor confidence tops 10-month high

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Investor confidence tops 10-month high
Photo: DPA
12:02 CET+01:00
German investor confidence hit a 10-month high in February amid optimism Europe's top economy will be able to escape from the eurozone crisis relatively unscathed, data showed on Tuesday.

The ZEW think tank's economic expectations index rose by a whopping 27.0 points in February to stand at plus 5.4 points.

It is the third consecutive monthly increase in the closely watched indicator and brought the barometer back into positive territory for the first time since May 2011 and to its highest reading since April 2011.

The increase was also much bigger than expected: analysts had been pencilling in a much more modest rise of around 10 points.

"The further strong increase in economic expectations shows that analysts believe the current lull in growth in Germany is unlikely to intensify," the ZEW said.

"Positive early indicators from the United States give rise to hope of a stabilisation in the global economy. And progress in the negotiations between Greece and its creditors will also have helped reduce uncertainty in the euro area," it said.

"From analysts' point of view, there is a good chance that the German economy will find itself on an upward trend in the second half of the year," said ZEW president Wolfgang Franz.

"Domestic demand will remain the main pillar of growth because the favourable labour market situation means consumers need not fear for their jobs. It remains crucial that a solution be found to the eurozone debt crisis," Franz insisted.

For the survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.

The sub-index measuring current assessments rose by 11.9 points to 40.3 points.

The ZEW index is the only barometer of investor confidence in Germany and this month's reading was based on responses from 284 analysts. A frequent criticism against it is that the index can be volatile and is therefore not a particularly reliable indicator.

Other business confidence indices, such as the purchasing managers' index or the all-important Ifo survey, which is based on as many as 7,000 responses in the real economy, are seen as more accurate indicators.

Earlier in Berlin, the economy ministry said the Organisation for Economic Co-operation and Development (OECD) is predicting that German growth will slow to just 0.4 percent this year from 3.0 percent in 2011 as a result of weak foreign trade and the eurozone debt crisis.

The German government itself is pencilling in growth of 0.7 percent this year and has insisted there is no danger of the world's second-largest exporter after China falling into recession.

AFP/mry

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