German Investor Confidence Rises on Robust Domestic Economy

  • Sentiment rebounds at home as euro-area expectations drop
  • ZEW says Paris terror attacks didn't damp investor outlook

German investor confidence rebounded in November, buttressed by resilient domestic demand and the prospect of more European Central Bank stimulus. 

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 ahead, rose to 10.4 from 1.9 the previous month. It was the first increase in eight months and compares with an estimate of 6.0 in a Bloomberg survey of economists. About 18 percent of the responses came after Friday’s terror attacks in Paris.

While Germany is grappling with a slowdown in emerging markets that threatens exports, it’s also benefiting from record-low unemployment, cheap credit and a weakened currency. ECB President Mario Draghi has signaled additional stimulus is in the pipeline for the 19-nation currency bloc, citing renewed downside risks for growth and inflation.

“The majority of participants see a possible interest-rate decrease in the euro zone over the next six months,” Dominik Rehse, a researcher at ZEW, told reporters in Mannheim. “Results received post-Paris attacks did not deviate from sentiment pre-attacks, neither for Germany, France nor the euro zone.”

Stock Gains

ZEW’s gauge for current conditions in Germany fell to 54.4 in November from 55.2. A measure of expectations for the euro area decreased to 28.3 from 30.1.

Germany’s DAX Index of stocks climbed to an intraday high after the report and was up 1.8 percent at 10,907 at 11:43 a.m. Frankfurt time. The euro was down 0.2 percent at $1.0666.

Concern over the wider fallout from Volkswagen AG’s emissions-cheating scandal was “exaggerated,” Rehse said. The automaker’s market share fell in October as it outlined plans to recall 8.5 million vehicles in Europe, out of a total 11 million affected worldwide, to fix a line of diesel engines fitted with software that falsified nitrogen-oxide emissions performance during regulatory tests.

Cooler Economy

While German economic growth slowed in the third quarter, along with an unexpected cooling of the euro area as a whole, the country’s jobless rate is at an all-time low of 6.4 percent. A weaker euro on the back of the ECB’s ultra-loose monetary policy provides support for exporters.

“The hope for new ECB action in December and consequently a weaker euro have clearly improved investors’ optimism,” said Carsten Brzeski, chief economist at ING-Diba AG in Frankfurt. “A standstill of the economy should not be feared.”

The ECB’s Governing Council is scheduled to decide on Dec. 3 whether more stimulus is needed for the region to spur consumer-price gains. Executive Board member Peter Praet said in a Bloomberg interview on Monday that there is a risk that inflation expectations become de-anchored.

(In an earlier version of this story, ZEW corrected the cut-off date for the survey to after the Paris terror attacks.)

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