Germany’s Investor Confidence Surges to Seven-Year High

German investor confidence rose for a fifth month in December to the highest level in more than seven years, adding to signs that the recovery in Europe’s largest economy is strengthening.

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, jumped to 62.0 from 54.6 in November. That’s the highest since April 2006 and exceeds all 35 estimates in a Bloomberg News survey. The median was for an increase to 55.0.

After a weak start into the fourth quarter, the German economy will grow strongly in the coming months, the Bundesbank said yesterday. While industrial production declined in October, a gauge of manufacturing output expanded at the strongest pace in 2 1/2 years in December.

“The German economy profits from quite robust domestic demand,” said Slavena Nazarova, an economist at Credit Agricole (ACA) CIB in Paris. “On top of that, export growth will accelerate once the euro zone’s recovery gets more sustained in 2014.”

The euro was little changed after the report at $1.3769 at 11:06 a.m. Frankfurt time. Germany’s benchmark DAX index rose and traded at 9126.34.

‘Good Prospects’

“With respect to the year 2014, the surveyed financial market experts are quite optimistic,” said ZEW President Clemens Fuest. “Despite rather disappointing economic data released recently, the financial market experts expect the economic development in Germany and the euro zone to improve further in 2014.”

A gauge of current conditions rose to 32.4 in December from 28.7, exceeding economists forecasts for an increase to 29.9, ZEW said in the report.

German gross domestic product rose 0.3 percent in the third quarter, down from 0.7 percent in the three months through June as spending at home offset weak demand from the 17-nation euro area, Germany’s largest trading partner. Economists predict quarterly expansions of 0.4 percent through mid-2014, according to a separate survey.

“There are good prospects for the lively domestic economy, as expressed by the strong increase of residential building permits and remarkably good consumer sentiment, to be complemented by a considerable strengthening in the industry,” the Bundesbank said yesterday. The institution this month raised its estimates for growth in 2013 to as much as 0.5 percent and to 1.7 percent for 2014.

Uneven Recovery

That contrasts with prospects for the euro-area economy, which the European Central Bank forecasts to contract 0.4 percent this year before growing 1.1 percent in 2014. Policy makers kept their benchmark interest rate at a record low of 0.25 percent this month after a surprise cut in November.

The recovery in the 17-nation euro area remains uneven. While a survey of purchasing managers showed manufacturing output in Germany rose this month to the highest level since June 2011, production in France, the region’s second largest economy, slumped to a seven-month low.

Recent data point to a “moderate acceleration in euro-zone growth, although with a mixed picture across sectors and, especially, countries,” said Marco Valli, chief euro-area economist at UniCredit Research in Milan. “Looking ahead, we expect euro-zone GDP momentum to strengthen as we enter 2014, reflecting a firming export impulse, more favorable corporate fundamentals and pent-up demand for capital goods.”

Wind Turbines

Siemens AG (SIE) won an order for wind turbines valued at more than $1 billion from MidAmerican Energy Holdings Co., the power unit of Warren Buffett’s Berkshire Hathaway Inc. for five projects in Iowa. The Munich-based company said yesterday it will provide 448 of its 2.3-megawatt turbines with total capacity of almost 1,050 megawatts, enough to power about 320,000 households.

German business confidence probably improved for a second month in December, economists predict. The Ifo institute will release that report tomorrow.

Today, Angela Merkel will be sworn in for her third term as German Chancellor, ending almost three months of bickering between her Christian Democratic bloc and the Social Democrats. The coalition agreement includes a national minimum wage and spending on pensions and infrastructure without raising taxes.

To contact the reporter on this story: Alessandro Speciale in Frankfurt at aspeciale@bloomberg.net

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

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