German investor sentiment rising

The Indicator of Economic Sentiment for Germany rose by 2.3 points in March over the previous month, the Centre for European Economic Research (ZEW) says. The indicator, which reflects German financial experts’ economic expectations, now stands at minus 3.5 points, after minus 5.8 points in the previous month.

Matthias Köhler, a researcher at the ZEW, says: “We have asked financial experts what they think the economy will look like in six months’ time. Overall, they said their outlook was still gloomy. But they expect the German economy to stabilise.”

The ZEW says the indicator stands well below its historical average of 26.2 points. The indicator’s upward movement, which was “very dynamic” during the last four months, slowed down in March, says the centre.

“The experts’ responses suggest that the downward trend will slow down. Experts are more confident about economic development in Germany on a six-month time horizon. They expect the German economy to hit the bottom this summer and recover by the end of the year.”

The indicator demonstrates experts believe the German government’s economic stimulus package is showing some initial results, adds Köhler – mainly in the automotive and building industries.

“Consumption is robust and inflationary pressure fell, which resulted in higher purchasing power,” he says. “Unemployment rose slightly but it is still on a relative good level given the overall economic situation.”

The ZEW says that renewed interest rate cuts by the European Central Bank and lower prices for raw materials and food have led to experts’ increased optimism.

Köhler adds: “Low interest rates helped banks to refinance themselves, and this should enable them to lend more freely to meet investment demand.”

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