German ZEW Investor Sentiment Jumps in Sign Economy Robust

  • Gauge for expectations rises to 6.2 in Oct. from 0.5 in Sept.
  • ZEW says German banks currently are burden to economic outlook

German investor confidence improved more than economists anticipated in October in a sign that growth remains robust even as concerns about German banks weigh on the outlook, according to the ZEW Center for European Economic Research in Mannheim.

Key Points

  • Index of investor and analyst expectations, which aims to predict economic developments six months ahead, rose to 6.2 from 0.5 in September
  • Reading is highest since June; median forecast was for increase to 4
  • Index of current situations rose to 59.5 from 55.1

Big Picture

The report comes after a string of bumper results from the German economy, with August exports surging the most since 2010 and factory orders growing at the fastest pace in five months. Business sentiment jumped to the highest level in more than two years in September. Even so, the Bundesbank has toned down its outlook, pointing to slower growth in the third quarter, as concerns remain over the consequences of Britain’s decision to leave the European Union. Uncertainty related to prospects of a multi-billion-dollar penalty for Deutsche Bank AG in the U.S. are also adding to risks.

Economist Takeaways

The positive reading is “broadly encouraging, although the index still points to a slowdown in German GDP growth,” said Jennifer McKeown, senior European economist at Capital Economics in London. The gauge “is now at its highest level in four months, suggesting that easing fears about the effects of Brexit have more than offset concerns about the wider implications of Deutsche Bank’s troubles.”

Other Details

  • Improved economic sentiment is sign of “relatively robust economic activity,” ZEW President Achim Wambach said in a statement
  • Wambach said positive impulses from industry, exports shouldn’t distract from economic, political risks; banks are currently a burden to outlook
  • ZEW measure for expectations in the euro area climbed to 12.3 from 5.4

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