German investor confidence rose less than economists forecast in May, highlighting the risks to the economic outlook as the euro region remains mired in recession.
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, edged up to 36.4 from 36.3 in April. Economists forecast a gain to 40, according to the median of 38 estimates in a Bloomberg News survey. (GRZEWI)
While an unusually long winter delayed Germany’s recovery from a slump in the final quarter of 2012, recent data indicate Europe’s largest economy is returning to growth. Factory orders and industrial production both increased more than economists forecast in March and the benchmark DAX share index climbed to a record high this month.
“It’s pretty clear that Germany has found its way back to growth,” said Guillaume Menuet, a senior economist at Citigroup Inc. in London. “The problem is that it seems to be the only big European economy growing, and that’s why the crisis in the euro area is far from over.”
ZEW’s gauge of the current situation fell to 8.9 from 9.2 in April. Economists had forecast an increase.
The euro traded slightly lower at $1.2967 at 12:33 p.m. in Frankfurt. European stocks extended losses after falling from their highest level in almost five years yesterday. The Stoxx Europe 600 Index slid 0.4 percent to 303.30.
Industrial production in the 17-nation euro region rose 1 percent in March from February, the European Union’s statistics office in Luxembourg said today.
The improvement “stands in stark contrast to the recessionary message conveyed” by other economic indicators, said Marco Valli, chief euro-area economist at UniCredit Global Research in Milan.
While the German economy probably recovered from a 0.6 percent contraction in the final quarter of last year to expand 0.3 percent in the first three months of 2013, France, Italy and the euro area as a whole are forecast to post first-quarter declines in gross domestic product.
The Federal Statistics Office in Wiesbaden will release the German data at 8 a.m. tomorrow, three hours before the euro-area GDP report is due.
“Despite mostly positive economic data for the German economy, the ZEW indicator remains at the level of the previous month,” said ZEW President Clemens Fuest. “This may be due to the still poor economic situation in the euro zone, which is also reflected by the recent ECB interest-rate cut.”
The European Central Bank this month reduced its benchmark rate to a record low of 0.5 percent and said it stands ready to act again if the economic outlook continues to deteriorate. It forecasts that the euro-area economy will shrink 0.5 percent this year. The Bundesbank predicts 0.4 percent growth in Germany.
Some German companies have turned to faster growing markets abroad to compensate for weaker sales at home.
Beiersdorf AG (BEI), the German maker of Nivea skin cream, on May 2 reported first-quarter profit that exceeded analysts’ estimates as higher emerging-market sales countered a drop in Europe.
Germany’s HeidelbergCement AG (HEI), the world’s third-largest maker of cement, said on May 8 that first-quarter earnings rose 3.3 percent as North American growth and job cuts helped offset the effects of harsh winter conditions in its domestic markets.
Malaysia’s economic growth probably exceeded 5 percent for a seventh straight quarter, the longest stretch since the depth of the global financial crisis in 2008. The government is due to release the data tomorrow.
In the U.S., retail sales unexpectedly advanced in April, corroborating forecasts of a pickup in the economy after a second-quarter soft spot.
Still, Germany is feeling the effects of the recession in the euro region, its biggest export market.
Lanxess AG (LXS), the chemical maker that joined the DAX in September, on May 8 predicted lower-than-estimated operating profit in the second quarter on weaker orders from the tire and auto industries.
Business confidence fell for a second month in April and by more than economists forecast.
“One of the concerns is that exports may not pick up anytime soon to support an economic recovery,” said Christian Schulz, senior European economist at Berenberg Bank in London. “Even though the ECB cut interest rates and the risks of a euro-area breakup are receding, German investors remain cautious.”
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