German Investor Sentiment Rises as Economy Weathers Woes
German investor confidence increased for a third month in October, signaling that the recovery in Europe’s largest economy is withstanding financial-market turbulence stoked by a U.S. fiscal standoff.
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, rose to 52.8 from 49.6 in September. That’s the highest since April 2010. Economists predicted no change, according to the median of 40 estimates in a Bloomberg News survey.
German business confidence as measured by the Ifo institute climbed to the highest level in 1 1/2 years in September as unemployment remained near a two-decade low and data signaled the euro-area recovery is continuing. At the same time, the U.S. government shutdown and the danger of a default of the world’s largest economy are rattling financial markets and risk derailing growth in Europe.
“Today’s ZEW index gives the impression that analysts believe in the invulnerability of the German economy,” Carsten Brzeski, senior economist at ING Groep NV in Brussels.“The new dark clouds coming from the other side of the Atlantic have not yet blacked out analysts’ optimism.”
ZEW’s gauge of the current situation fell to 29.7 from 30.6 in September, compared with the median forecast of 31.3 in the Bloomberg survey. An indicator of euro-area investor confidence increased to 59.1 from 58.6. The group surveyed 237 investors and analysts from Sept. 30 to Oct. 14.
“Financial market experts remain optimistic,” ZEW President Clemens Fuest said after the report. “A greater impact over the dispute on the U.S. debt ceiling isn’t visible.”
German Finance Minister Wolfgang Schaeuble said on Oct. 12 that Europe is no longer the “main worry” for the global economy. “Risks have shifted somewhat in the direction of emerging countries, where growth has slowed,” he said.
Last week, the International Monetary Fund lifted or kept unchanged the economic outlook for the euro area and its four largest members through 2014, while cutting growth forecasts for developing nations and world output as a whole. It predicts German growth of 0.5 percent this year and 1.4 percent in 2014.
“There’s a big risk that shocks will continue to disturb the European environment,” UBS AG Chairman Axel Weber said in an interview with Bloomberg Television on Oct. 10. The current situation in the U.S. “will take a toll on growth.”
The U.S. government has been partly closed for almost two weeks as President Barack Obama and Senate leaders fail to agree on a budget and an Oct. 17 deadline to raise the country’s debt ceiling approaches. Rates on Treasury bills maturing through the end of the year rose last week as lawmakers sought a short-term compromise.
Germany’s benchmark DAX index traded at an all-time high of 8,786.92 at 11:20 a.m. in Frankfurt.
“Financial markets are flickering at the moment because of uncertainty surrounding the discussion about U.S. debt,” said Alexander Koch, an economist at Raiffeisen Schweiz in Zurich. “But Germany’s economic outlook remains solid and the past weeks have shown that the recovery in Europe and other important markets will continue, although it won’t be very fast.”
Earlier this month, Daimler AG (DAI) said that it expects record Mercedes-Benz sales this year, while Porsche AG said that profit growth is likely to resume in 2014. The company is looking to enter 15 new countries by the end of the decade as part of its growth strategy, Bernhard Maier, Porsche’s global sales chief, said in an interview on Oct. 14.
While German industrial output and exports rebounded in August, factory orders fell for a second month. European Central Bank President Mario Draghi said on Oct. 2 that economic data for the euro area confirm the picture of “gradual improvement from low levels” after the economy emerged from its longest-ever recession in the second quarter.
Henkel AG Chief Executive Officer Kasper Rorsted said Europe “will have quite a challenging position” in the next four years, downplaying the prospect of any imminent recovery.
“Indicators for Germany and the euro area are quite good but analysts are aware of the uncertainty stemming from the budget fight in the U.S.,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “In any case, we will see a second quarter of growth in the euro area and I’m very satisfied with its performance.”
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