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German Investor Confidence Surges to Three-Year High: Economy

German Investor Confidence Rose More Than Forecast in February
While the euro’s appreciation this year could undermine exports, latest data suggest Germany is on the rebound. Photographer: Hannelore Foerster/Bloomberg

German investor confidence jumped more than economists forecast in February to the highest in almost three years, adding to signs that Europe’s largest economy is rebounding from its slump.

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, climbed to 48.2 from 31.5 in January. That’s the highest since April 2010. Economists forecast a gain to 35, according to the median of 38 estimates in a Bloomberg News survey.

The Bundesbank said yesterday it expects Germany to return to growth this quarter as confidence improves and the global economy gains strength. Gross domestic product fell 0.6 percent in the final quarter of 2012, more than economists forecast, as exports declined and companies postponed investment amid Europe’s sovereign debt crisis.

“Despite the upbeat ZEW reading, we remain cautious with regard to Germany’s prospects as there are many challenges to overcome in 2013,” said Johannes Gareis, euro-zone economist at Natixis in Frankfurt. “We still expect positive growth out of Germany, albeit at a slower pace than 2012.”

ZEW’s gauge of the current situation fell to 5.2 from 7.1. Economists had forecast a gain to 9. The euro rose 0.1 percent today and traded at $1.3365 as of 3:32 p.m. Frankfurt time. European stocks climbed for the first time in four days, with the Stoxx Europe 600 Index rising 0.9 percent.

Forecasts Cut

The Bundesbank in December predicted German growth will slow to 0.4 percent this year from 0.7 percent last year. That’s still better than the 0.3 percent contraction forecast by the European Central Bank for the euro region as a whole.

European Union car sales fell to the lowest level for a January in at least 23 years, the Brussels-based European Automobile Manufacturers’ Association said today.

Registrations dropped 8.7 percent to 885,159 vehicles last month from 969,219 cars a year earlier, ACEA said. The figure was the lowest start to the year since the group began tracking sales in 1990.

MAN SE, the commercial-vehicle maker controlled by Germany’s Volkswagen AG, said on Feb. 8 it may slow investments and will work to cut spending as the region’s shrinking economies cause earnings to drop.

While the euro’s appreciation could undermine exports, latest data suggest Germany is on the rebound. Factory orders and industrial production rose more than forecast in December and unemployment unexpectedly dropped in January.

Worst ‘Over’

Infineon Technologies AG, Europe’s second-biggest chip maker, on Jan. 31 forecast earnings will improve in the current quarter as demand picks up in the car industry.

“Many people in capital markets now believe the worst of the debt crisis is over,” said Michael Schroeder, an economist at ZEW in Mannheim. “We also have the lowest interest rates in decades.”

The ECB has cut its benchmark rate to a record-low of 0.75 percent, flooded the banking system with cheap loans and pledged to buy government bonds if needed to restore order to financial markets. ECB President Mario Draghi said yesterday that the euro region, whose recession deepened in the fourth quarter, should begin a gradual recovery later this year as monetary stimulus works its way through the economy.

Global Rebound

The Reserve Bank of Australia said today there are indications that lower borrowing costs are starting to spur its economy and reiterated that tame prices provide scope to ease further if needed.

In the U.S., the National Association of Home Builders/Wells Fargo index of builder confidence may have climbed this month to 48, the highest reading since 2006, from 47 in January, according to the median forecast in a Bloomberg survey.

Germany’s outlook “has improved relatively quickly and in remarkable fashion in the past three months,” the Bundesbank said in its monthly report yesterday. “For the first quarter of 2013 an expansion of overall economic output can be expected from today’s perspective. For the remainder of the year, a gradual economic recovery is on the cards.”

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