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Germany’s ZEW Investor Confidence Unexpectedly Falls

A Shopper Carries a Shopping Bag in Berlin
Germany is relying on domestic consumption to support its economic growth as the 18-nation euro area, its biggest trading partner, struggles with record unemployment and shrinking bank lending. Photographer: Krisztian Bocsi/Bloomberg

Jan. 21 (Bloomberg) -- German investor confidence unexpectedly fell for the first time in six months, signaling caution over the outlook for the euro area’s economic recovery

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, slid to 61.7 in January from a seven-year high of 62 in December. Economists predicted an increase to 64, according to the median of 40 estimates in a Bloomberg News survey.

Germany is relying on domestic consumption to support its economic growth as the 18-nation euro area, its biggest trading partner, struggles with record unemployment and shrinking bank lending. The Bundesbank has predicted that German gross domestic product will expand “strongly” in coming months after signs of a slowdown in the final three months of 2013.

“The fundamentals of the German economy remain strong,” said Carsten Brzeski, senior economist at ING Groep NV in Brussels, said in a note to clients. “In our view, there are sufficient arguments in favor of an acceleration of economic growth rather than in favor of a drop in soft indicators. Today’s ZEW readings fit perfectly into this picture,” he said, highlighting the ZEW’s current assessment component.

That gauge of the current situation rose to 41.2 in January from 32.4 the prior month, ZEW said. A measure of expectations for the euro area climbed to 73.3 from 68.3.

Deutsche Bank Loss

The euro was little changed at $1.3533 at 11:32 a.m. Frankfurt time. Germany’s DAX stock index was up 0.4 percent at 9,754.

Frankfurt-based Deutsche Bank AG, Europe’s biggest investment bank by revenue, reported a surprise fourth-quarter loss on Jan. 19 because of legal costs and accounting charges. The company is spending money to improve controls, reduce headcount and move staff to cheaper locations as part of a plan to increase profitability.

German GDP probably increased about a quarter of a percent in the three months through December, compared with 0.3 percent in the third quarter, the Federal Statistics Office said last week. Full-year growth was 0.4 percent, missing the 0.5 percent median estimate by economists in a separate Bloomberg survey.

“We see a general recovery of the German economy, with a little stronger GDP growth than there was in the last quarter,” said Ralph Solveen, head of economic research at Commerzbank AG in Frankfurt. “We are hesitant to increase forecasts for investment too strongly because wage pressure will hamper the expansion prospects of companies.”

The European Central Bank forecasts that the euro-area economy will grow 1.1 percent this year after an estimated contraction of 0.4 percent in 2013. Policy makers at the Frankfurt-based ECB kept their benchmark interest rate at a record low of 0.25 percent this month after a surprise cut in November.

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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