Investor confidence rises despite weak growth

15th February 2005, Comments 0 comments

15 February 2005 , BERLIN – Despite officials revising down Germany's 2004 growth rate, a key index measuring sentiment among analysts and investors in Europe's biggest economy rose for the third straight month in February.

15 February 2005

BERLIN – Despite officials revising down Germany's 2004 growth rate, a key index measuring sentiment among analysts and investors in Europe's biggest economy rose for the third straight month in February.

Drawn up the Centre for European Economic Research (ZEW), the index, which was released Tuesday, gained 9 points to rise to 35.9 points.

The centre said the latest reading is now above the historical average of 34.4 points. The February rise was not quite as large as the 12.5 points gain measured in the January index, but continued the trend of an improving economic sentiment in the country.

The ZEW survey is based on a poll of 318 analysts and institutional investors who were asked about their medium-term expectations concerning economic activity and capital markets.

The ZEW cited "a striking rise of incoming orders in December" as a factor, while national demand for investment goods generated the highest monthly value in ten years and could be seen as a signal of an economic upturn in 2005.

"Fortunately, the expectations of the financial market analysts indicate a more stable upward trend of the domestic economy than sceptics assumed," ZEW president Professor Wolfgang Franz said.

Historically low interest rates and the fact that the oil and foreign exchange markets continued to calm down may also have contributed to increasing optimism, he added.

The ZEW report said that the favourable development of industrial production may have been a final reason for a more positive view of the economic situation in February.

Meanwhile, however, data released by Federal Statistics Office showed that the German economy in 2004 expanded by 1.6 percent, which was less than originally estimated following a slowdown in the second half of the year.

Last month the statistics office estimated that the German economy grew by 1.7 percent gross in 2004.

The office said that in the fourth quarter, GDP was down 0.2 percent from the third quarter.

Germany's export engine performed strongly to account for the overall growth, but could only partially compensate for the drop off in domestic economic output, the office said.

"This means that the economic recovery observed in the first two quarters of 2004 did not continue into the second half of the year," the office said.

The office said that year-on-year, the final quarter GDP was 1.5 percent higher than in the last quarter of 2003. But it said this was due to calendar effects - two and one-half more working days. After adjusting for this, the economic performance would have increased by just 0.6 percent year-on-year in the last quarter.

It said the economic performance in the fourth quarter of 2004 was achieved by 38.9 million employed persons, up by 261,000 or 0.7 percent from the final quarter the year before.

[Copyright DPA with Expatica 2005]

Subject: German news

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