German investor sentiment stalls in January

By Simon Morgan, AFP

FRANKFURT–Investment sentiment in Germany stalled unexpectedly in January after rising to a seven-year high the previous month, but recovery of Europe’s top economy remains intact, a survey found on Tuesday. The widely watched investor confidence index calculated by the ZEW economic institute inched down by 0.3 point to 61.7 points in January, ZEW said in a statement.

Analysts had been pencilling in a further increase after the barometer hit its highest level in more than seven years in December. But ZEW president Clemens Fuest insisted the latest reading was no real setback. “Hovering at a high level, economic expectations for Germany have moved sidewards in this month’s survey,” he said.

“For months, the surveyed financial market experts have expected an economic upswing. In this month’s survey the clearly improved assessment of the current economic situation seems to confirm these expectations,” Fuest said.

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 financial market players’ view of the current economic situation in Germany rose by 8.8 points to 41.2 points in January, its highest level since May 2012. Investor sentiment is “still going strong,” said ING DiBa economist Carsten Brzeski. The strong equity market and the possibility of further action by the European Central Bank “have clearly kept German investors in a positive mood,” the expert said. “The ZEW index has not the best track record when it comes to predicting German economic activity. “However … over the last years, the current assessment component has become a rather good leading indicator for GDP growth. In this regards, today’s sharp increase of the current assessment component is good news for the economy,” Brzeski said.

“The fundamentals of the German economy remain strong. With a solid labour market, higher real wages, the gradual investment pick-up, filled order books and low inventories the German economy seems to be in the starting blocks for a growth acceleration this year,” he added. “All in all, the January data confirm our picture of an economic upturn in the euro area at the turn of the year,” said BayernLB economist Stefan Kipar.