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Investor confidence in Germany hits 4-year high: ZEW

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Investor confidence in Germany hits 4-year high: ZEW

Confidence in the euro area’s largest economy soared to a four-year high, according to the monthly ZEW survey. The Indicator of Economic Sentiment, which measures institutional investor sentiment in the German economy, rose nearly 2 percentage points to 54.6 in November, compared to expectations for 54.0. The indicator predicts economic activity six months in advance.

Investors assessed Germany’s current situation much differently. The Current Situation Indicator fell 1 percentage point to 28.7, well below expectations.

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

Germany remains the lone bright spot for an otherwise struggling euro region. Eurozone consumer inflation fell to 0.7 percent in October, a four-year low. The euro area economy expanded just 0.1 percent in the third quarter, as three of the region’s largest member states reported declines. Economic growth in Germany remained positive in Q3, as GDP advanced 0.3 percent. France and Italy, the euro area’s second and third largest economies respectively, declined 0.1 percent in Q3.

Investor confidence in the euro area also improved in November. The Eurozone Indicator of Economic Sentiment rose 1.1 percentage points to 60.2. The currency region faces an uphill battle getting back on track. Record high unemployment and stagnation continue to dampen recovery efforts. Youth unemployment is a staggering 23.5 percent; this figure is as high as 40 percent in Italy.

The European Central Bank cut its benchmark lending rate in half earlier this month in a last-ditch effort to promote borrowing. It is yet uncertain whether this will be enough to propel the currency bloc forward. Market participants expect the ECB to adopt more drastic measures in the coming months should the 17-nation currency zone fall back into recession.

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