German confidence rises as euro zone grows again
New survey shows investors more upbeat than expected, as positive signs from China and US suggest a global recovery is under way
German investor confidence increased more than economists expected in August as the recovery in Europe's largest economy helped pull the euro area out of its longest-ever recession.
The ZEW Centre for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, rose to 42 from 36.3 in July - the highest level since March. Economists predicted 39.9, according to the median of 42 estimates.
Growth in Germany may have exceeded economists' forecasts in the second quarter, according to a government estimate, coaxing the 17-nation region out of a six-quarter slump. Paired with accelerating growth in the US and a pickup in Chinese exports and manufacturing, signs of a global economic recovery are increasing.
"Better-than-expected data from China and the US are reflected in investor confidence," said Aline Schuiling, senior economist at ABN Amro Bank in Amsterdam. "The fundamentals of the German economy are healthy and that should help other European countries grow. But there's still a risk that the debt crisis will flare up again."
ZEW's gauge of the current situation jumped to 18.3 from 10.6 in July, while an indicator of euro-area investor confidence increased to 44 from 32.8.
"First signs of an end to the recession in important euro-zone countries may have contributed to the indicator's rise," ZEW said.
"This is also reflected by the strong increase of economic expectations for the euro zone. Furthermore, the economic optimism is supported by the robust domestic demand in Germany."
The euro rose after the report.
The German economy probably expanded about 0.75 per cent in the second quarter, the Economy Ministry estimates. Economists project growth of 0.6 per cent.
The country's benchmark DAX index has risen more than 5 per cent since July 4, when European Central Bank president Mario Draghi pledged to keep interest rates low for an extended period to rekindle growth in the euro area.
Gross domestic product in the region rose 0.2 per cent in the three months to June, economists predict.
While parts of southern Europe remain mired in a slump and almost one in four young people in the euro area are without a job, German industrial production, factory orders and exports all rose in June, and business confidence improved for a third month in July.
Kloeckner, a German steel trader, has said it expects profit to revive next year.
European countries accounted for 69 per cent of German exports last year.