German investor confidence rises sharply

9 December 2003

BERLIN – German investor confidence surged in December despite worries that a strong euro could harm the country’s export- oriented economy, according to a survey released Tuesday.

Compiled by the Mannheim-based Centre for European Economic Research, the so-called ZEW index rose from 67.2 points in November to 73.4 points in December.

The December reading beat the consensus forecasts by analysts, who had predicted that the index would rise to 70.5.

The ZEW said the increase came in the wake of evidence of a strong economic rebound in the US German factory orders also have increased dramatically, which helped allay concerns about the euro’s increase against the dollar.

The common currency’s strength was currently of minor importance, the institute said. Coinciding with the release of the ZEW’s monthly report, the euro briefly hit another all-time high of 1.2272 dollars with the common currency gaining more than 15 percent against the greenback since the start of the year.

The financial analysts’ expectations reflect their undiminished optimism, said ZEW president Wolfgang Franz. Now it is important that thorough reforms are realized, he said referring to Germany’s current economic reform push.

Based on a survey of 316 institutional investors and analysts, the ZEW survey, which gauges economic expectations for the previous six months, acts as a curtain raiser to the release later in December of the more broadly based and closely watched Ifo business confidence survey.

The ZEW’s measurement of current economic conditions in Germany also improved with respondents slightly less pessimistic in December than in November.

The report showed that 83.7 percent compared to 87.5 percent of respondents in the previous month felt that the current economic situation was bad.

This was despite continuing wrangling between the Social Democrat- led government and the conservative opposition over Chancellor Gerhard Schroeder’s ambitious reform package.

In addition, the ZEW survey showed economic sentiment for the 12- member eurozone had improved in December as well. The indicator gained 6.1 percent compared with last month and now stands at 78.2 points.

All in all, ZEW said economic sentiment continues to be slightly more optimistic for the eurozone than for Germany.