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German Investor Confidence Unexpectedly Falls in January: ZEW

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German Investor Confidence Unexpectedly Falls in January: ZEW

Confidence levels among German investors unexpectedly fell in January for the first time in six months, a sign external pressures could dampen the outlook on Europe’s largest economy.

The ZEW Indicator of Economic Sentiment, courtesy of the Centre for European Economic Research, eased from 62.0 to 61.7. A median estimate of economists polled by Bloomberg News called for 64.0.The Indicator of the Current Situation, meanwhile, increased from 32.4 to 41.2.

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

While German fundamentals remain strong, especially when compared to other European economies, its reliance on domestic consumption has diminished several of its comparative advantages. Germany’s export market struggled in 2013 amid regional recession, which reduced the demand for German goods and services. In real GDP terms, the German economy expanded at a rate of 0.4 percent last year, compared to 0.7 percent in 2012 and 3.3 percent in 2011. The balance of imports and exports reduced GDP by 0.3 percentage points, official data showed last week. Household final consumption expenditure was the main driver of the economy in 2013, rising at a price-adjusted rate of 0.9 percent.

The Bundesbank expects Germany to rebound “strongly” in the first half of 2014. The International Monetary Fund projects Germany’s economy to expand 1.6 percent this year and 1.4 percent in 2015, according to the revised World Economic Outlook report released today.

Economic expectations for the currency bloc increased in January, according to a separate Eurozone gauge. The indicator rose 5 points to 73.3.

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