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Economic Sentiment Hits 7-year High for Germany: ZEW

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Economic Sentiment Hits 7-year High for Germany: ZEW

Economic expectations for Europe’s largest economy soared to the highest level since April 2006, according to a gauge of investor sentiment measured by ZEW.

The Economic Sentiment Indicator, which measures institutional investor sentiment toward Germany, rose 7.4 percentage points to 62.0 in December. A median estimate of analysts polled by Reuters called for a moderate rise to 55.0. The indicator was derived from a survey of 252 analysts and institutional investors conducted between December 2nd and December 16th.

A gauge of the current situation also improved in December, rising from 28.7 to 32.4, suggesting investors are already noticing improvements in the German economy. German manufacturing output expanded at the fastest pace in 30 months in November, according to a recently-published PMI report from Markit Group.

The improving economic outlook in the United States was one of the biggest factors driving German sentiment, according to ZEW economist Michael Schroeder. Output in the world’s largest economy has remained strong in the fourth quarter, with job creation accelerating at the fastest pace since February-March.

Analysts were increasingly optimistic about the year to come, despite ongoing struggles in the broader euro area, of which Germany is a key constituent.

“With respect to the year 2014, the surveyed financial market experts are quite optimistic,” said ZEW President Dr. Clemens Fuest. “Despite rather disappointing economic data released recently, the financial market experts expect the economic development in Germany and the Eurozone to improve further in 2014.”

According to ZEW economist Marcus Kappler, recession in the euro area is “bottoming out,” which bodes well for Germany. The euro area is expected to return to growth in 2014, according to the latest forecast from the OECD. Economic expectations for the euro area increased 8.1 percentage points in December, according to a separate sentiment gauge calculated by ZEW.

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