German Investor Confidence Rises for a Fourth Month

German investor confidence rose to the highest level in more than four years, signaling that the economic recovery in Europe’s largest economy remains on track even after a third-quarter slowdown.

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 for a fourth month to 54.6 in November. That’s the strongest reading since October 2009 and up from 52.8 the prior month. Economists predicted an increase to 54, according to the median of 40 estimates in a Bloomberg News survey.

The Bundesbank said yesterday that the German economy remains on a “solid growth path,” even after the expansion slowed to 0.3 percent in the third quarter and business confidence unexpectedly dropped in October. Factory orders rose more than economists predicted in September and unemployment remained near a two-decade low in October.

“Germany’s economy is strong and solid, especially when you consider the fact that domestic demand is the main reason for growth,” said Stefan Schneider, chief international economist at Deutsche Bank AG in Frankfurt. “That makes the country a bit less dependent on the rest of the world and I’m confident we’ll continue to see steady growth over the course of the next year.”

Domestic Demand

A gauge of the current situation dropped to 28.7 in November from 29.7 the prior month, today’s report showed. A measure of expectations for the euro area advanced to 60.2 from 59.1. That’s the highest level since March 2006.

The euro was little changed at $1.3501 at 11:16 a.m. Frankfurt time. The DAX stock index was down 0.4 percent at 9,186.81.

“Economic expectations for Germany have been hovering at a high level for months,” ZEW President Clemens Fuest said in a statement. “The slightly improved economic outlook for the euro zone might have contributed to this development.”

German growth in the third quarter was driven exclusively by domestic demand, the nation’s statistics office said last week. Investment in equipment and construction increased and private and government consumption rose slightly while net trade damped output as exports stalled.

Domestic sales helped Henkel AG, the Dusseldorf-based maker of Loctite glue and Fa deodorant, report third-quarter operating profit this month that beat estimates.

German Headwinds

The economy in the euro region, Germany’s biggest export market, expanded 0.1 percent in the third quarter after it emerged from recession in the three months through June. France’s economy, the region’s second-biggest, unexpectedly shrank and Italy extended a record-long contraction.

While Germany remains the growth engine for the euro area, it faces headwinds including political wrangling domestically and the fragility of the currency bloc’s recovery.

Chancellor Angela Merkel is still locked in negotiations to form a new government almost two months after her Christian Democratic bloc won a general election. A group of her economic advisers said last week that possible compromises made to form a coalition with the Social Democrats, including a minimum wage and higher pensions, risk rolling back reforms that have helped the economy.

“While Germany is on the right path it is facing risks,” said Carsten Klude, head of investment strategy at M.M. Warburg & Co. in Hamburg. “But I think the difficulties will be overcome and both Germany and the euro area will grow steadily next year.”

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