German investor confidence improves in October

18th October 2005, Comments 0 comments

18 October 2005, BERLIN - German investor confidence rose in October, a key survey released Tuesday showed, as optimism about the outlook for Europe's largest economy helped to offset worries over the prospects for reform under the nation's new government.

18 October 2005

BERLIN - German investor confidence rose in October, a key survey released Tuesday showed, as optimism about the outlook for Europe's largest economy helped to offset worries over the prospects for reform under the nation's new government.

Compiled by the Mannheim-based Centre for European Economic Research, the so-called ZEW index edged up to 39.4 points in October from 38.6 points in September.

In releasing the forward-looking indicator, ZEW said that somewhat lower oil prices and robust growth in the world economy had a positive impact on the index.

But it said ongoing uncertainty about economic policy under Germany's new coalition government had a negative impact on how those responding to the survey viewed future growth prospects.

"Experts appear to fear that the speed of political reforms will slow down and that there will be no majority for important reform programs," said the ZEW.

The release of the closely watched index came just 24 hours after Germany's Chancellor designate Angela Merkel unveiled the list of ministers from her conservative political bloc who are to join the new government.

Merkel's Christian Democrats (CDU) and their Bavarian-based associate party (Christian Social Union) have been forced to forge a "grand coalition" with the Social Democrats (SPD) after last month's inconclusive national elections.

Talks on finalising the new coalition are expected to drag on into next month.

Picking up on the mood in Germany's financial markets, economists from Germany's Commerzbank AG played down the prospects for economic reform in a note sent to clients Tuesday.

"A determined continuation of the reform course appears rather questionable after the financial markets' preferred constellation of black-yellow failed to secure a majority," the Commerzbank economists said.

Black-yellow are the political colours of the CDU-CSU and the small pro-business Free Democrats. The increase in the ZEW index in October was marginally less than economists had expected, who had forecast that the index would rise to 42 points.

The improvement in October, however, means that the index remains above its historic average of 34.2 points.

Based on a survey of 324 institutional investors and analysts, the ZEW survey acts as a curtain raiser to the release later in the month of the more broadly based and closely watched German Ifo business confidence survey.

The analysts' evaluation of the current economic situation in Germany was essentially unchanged. The ZEW indicator measuring current economic conditions increased slightly from minus 58.1 to minus 58.0 points.

At the same time, the ZEW said that the analysts expectations for the 12-member eurozone increased in October.

But while the indicator gauging expectations in the eurozone rose by 2.9 points to 34.7 points, the index measuring the current economic situation in the currency bloc slipped and now stands at minus 26.9 points.

Meanwhile, Germany's Chambers of Commerce and Industry (DIHK) released a survey Tuesday of its more than 25,000 members, which also underscored expectations of accelerating economic growth and the likely end of big job cuts by industry.

But the DIHK survey also pointed to concerns among its members about the chances of Germany's new "grand coalition" government forging ahead with economic reform.

The DIHK called on the CDU-CSU and SPD leaders to use their coalition talks to set down clear economic reform goals.

DPA

Subject: German news

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