German inventor sentiment hits 13 – month high

Business

German is a powerful county. Investors in Germany are optimistic about the outlook for Europe’s biggest economy given the strength of domestic demand, could sour sentiment in future, data showed on Tuesday.

The widely watched investor confidence index calculated by the ZEW economic institute rose for fifth consecutive month to ZEW said in a statement.

“Economic sentiment in Germany remains at a high level. In particular, the continuing positive development of the domestic economyconfirms the expectation of the expert,” said ZEW president Clements Fuest.

“At the same time, limited progress is being made with regard to solving the Ukraine conflict and the sovereign debt crisis in Greece. This has a dampening effect on sentiment,” Fuest added.

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

The sub-index measuring financial market players view of the current economic situation in Germany jumped by 9.6 points to 55.1 in March, its highest level since July 2014.

“The March ZEW reading may have disappointed analyst’s high expectations. But optimism is still growing,” said Bayern LB economist Stefan Kipar. “It could also feed into hard economic data in the coming months,” Kipar said. But “momentum may remain moderate against the backdrop of uncertainty surrounding Greece and Ukraine,” he added.  

Natixis economist Johannes Gareis felt the Greek crisis “is steadily disappearing from the radar screen of German investors.”

This was reflected in the strong rise in the blue-chip DAX index which is now firmly above 12,000 points, driven by optimism about the European Central Bank’s ultra-expansive monetary policy, the expert argued.

“At this stage, there is no strong case for beginning to question the strength of Germany‘s economic recovery,” he said.

Berenberg Bank economist Christian Schulz attributed the rise in the ZEW index to “the tailwinds of cheap oil, a weaker euro and lower funding costs for companies and households.

However, the New Greek risk many be dampening optimism somewhat, he cautioned.

ING DiBa economist Carsten Brzeski felt that over the last two years, the ZEW index “has returned as an interesting and more reliable indicator for future economic growth.”

“As a main beneficiary of the ECB’s program me of quantitative easing, supported by sound domestic fundamentals, the German economy should power ahead,” he said.