Daily Management Review

Investors are optimistic about Germany's prospects


02/20/2018


The state of the German economy is expected to improve in the next six months, Reuters reports citing a poll that showed a generally upbeat outlook, despite a slight deterioration in investor sentiment in February.



Ingo Joseph
Ingo Joseph
The index of economic sentiment in February fell from 20.4 to 17.8 points, the ZEW research institute reported. Analysts interviewed by Reuters on average predicted a more significant decline in the indicator - up to 16 points.

A separate indicator, reflecting investors' assessment of current economic conditions, fell to 92.3 points from 95.2 last month. The January value of the indicator was the maximum for the entire period of research, that is, since 1991. Analysts surveyed by Reuters expected the index to fall to 93.9 points in February.

"The results of the latest poll continue to show a positive outlook for the German economy," said ZEW President, Professor Achim Wambach. According to him, the respondents' assessment of the current conditions is still at a very high level.

Economic growth in Germany can be explained by positive dynamics in both the world economy and private consumption, Wambach said. At the same time, he noted that inflation expectations for Germany and the eurozone as a whole began to grow.

Europe's largest economy is growing amid record high employment, higher real wages and lower borrowing costs. Restoring exports and investment companies also contribute to economic recovery.

As reported earlier, the Sentix index, which measures investor confidence in the euro area, fell to 31.9 points in February from 32.9 points in January. The index, tracking the mood in Germany, fell to 36.2 from 40.1 points last month. The indicator of expectations in Germany fell to 5.5 from 11.8 points, reaching its lowest level since July 2016.

The deterioration in sentiment was due to the dissatisfaction with the coalition talks between the conservatives of German Chancellor Angela Merkel and the center-left Social Democrat Party (SPD), Sentix reported.

However, the month of negotiations, which UBS economist Paul Donovan called "the most tiring political crisis in the world," ended. Earlier in February, the conservative bloc of Angela Merkel and the Social Democratic Party of Germany concluded an agreement to create a new coalition government.

On Tuesday, SPD members began voting on whether their party should join the new coalition with the conservatives of Merkel.

source: reuters.com






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