German Investor Confidence Rises for a Fourth Month as Economy Strengthens

German investor confidence increased for a fourth month in February as Europe’s largest economy gathered strength and stocks rose to a three-year high.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, rose to 15.7 from 15.4 in January. Economists forecast a gain to 20, according to the median of 38 estimates in a Bloomberg News survey.

The German economy is driving the region’s expansion after demand from faster-growing economies such as China boosted exports and helped push unemployment to the lowest in almost two decades. Germany’s DAX Index has gained 34 percent over the past year and Bayerische Motoren Werke AG, the world’s largest luxury carmaker, has forecast “significant” sales growth.

“The economy is powering ahead,” said Sarah Hewin, a senior economist at Standard Chartered Bank in London. “The improvement in the labor market is an ongoing trend and that’s going to support a more broad-based recovery.”

The euro was little changed after the release, trading at $1.3511, up from $1.3489 yesterday.

ZEW’s indicator measuring current economic sentiment rose to 85.2 in February from 82.8 the previous month, ZEW said.

Photographer: Hannelore Foerster/Bloomberg

Hochtief AG , Germany’s largest builder, yesterday forecast higher fiscal full-year profit on surging orders. Close

Hochtief AG , Germany’s largest builder, yesterday forecast higher fiscal full-year... Read More

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Photographer: Hannelore Foerster/Bloomberg

Hochtief AG , Germany’s largest builder, yesterday forecast higher fiscal full-year profit on surging orders.

China Sales

The German economy expanded 0.4 percent in the fourth quarter from the previous three months, when it grew 0.7 percent, the Federal Statistics Office in Wiesbaden said today. In France, gross domestic product rose 0.3 percent from the third quarter, while the euro-region economy grew 0.3 percent.

The benchmark DAX index has rallied 7.1 percent this year to the highest since January 2008, reflecting optimism that a strengthening global recovery will boost earnings. Hochtief AG, Germany’s largest builder, yesterday forecast higher fiscal full-year profit on surging orders.

BMW Chief Financial Officer Friedrich Eichiner on Feb. 3 forecast the Munich-based company to have “double-digit” sales growth in markets including China, Korea and Brazil. “It’s clear that the capacity in China will be increased,” he said.

Germany’s VDMA machine-makers’ association said on Feb. 10 that output may increase 10 percent this year after rising 8.8 percent in 2010. Plant and machinery orders surged an inflation adjusted 44 percent in December from a year ago, it said.

The improving outlook has also fueled payrolls growth, lowering the German jobless rate to 7.5 percent, the lowest since 1992. Business confidence rose to a record last month.

Companies are already gaining room to pass on higher costs to consumers just as labor unions seek more pay. German inflation accelerated to 2 percent in January from 1.7 percent the previous month. The European Central Bank aims to keep annual increases in consumer prices just below 2 percent.

With countries from Ireland to Greece struggling to lower their budget deficits and restore investor confidence, the ECB earlier this month kept its benchmark interest rate at a record low of 1 percent. That may be risky for Germany, which is the fastest-growing major economy in the 17-member euro area.

“The expansionary monetary policy is laying the groundwork for a renewed buildup of imbalances,” said Natascha Gewaltig, an economist at Action Economics in London. “Previous energy price increases have started to feed through the product chain and with unemployment falling and wages picking up, there is more room to pass on price increases to consumers.”

To contact the reporter on this story: Jeffrey Black in Frankfurt at jblack25@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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