Germany Expectations Current Conditions
————————————————————-
November +1.8 +81.5

MNI survey median: -6.0 +75.0
MNI survey range: -17.2 to +3.0 +70.0 to +82.0

October -7.2 +72.6
—

FRANKFURT (MNI) – Investors’ assessment of the six-month outlook
for the German economy recovered more than generally expected this
month, while their view of the current situation continued to brighten,
the Centre for European Economic Research (ZEW) reported on Tuesday.

The ZEW’s economic expectations index rebounded nine points to a
three-month high of +1.8, capping the run of consecutive declines at
six. Still, the indicator remains well below the long-run average of
26.9 points.

“Compared to other industrialised countries the German economy has
seen a stronger recovery so far,” the ZEW said in a press release. “This
months rise of economic sentiment possibly results from financial
market experts growing optimism towards the economic perspectives of
other countries.”

“Moreover, the positive development of the German labour market has
stimulated domestic demand,” the press release continued. “This, too,
may have boosted the financial market experts sentiment.”

The current conditions component also surprised to the upside,
jumping 8.9 points to 81.5 in November.

“In fact, the current situation of the German economy is
exceptionally good,” ZEW President Wolfgang Franz said. “Nevertheless,
there is no need to be overoptimistic with respect to the development of
Germanys economic activity next year.”

German GDP growth slowed to 0.7% in 3Q following 2Q’s record 2.3%
surge. While growth remains well above the Eurozone average, a slowing
global recovery and a strong euro are widely expected to weigh on
economic activity in the months ahead.

“The German economy is not yet in a self-sustaining phase,” ECB
Governing Council member Axel Weber warned last month. “Growth in the
second half of the year will be lower.”

The International Monetary Fund expects the German economy to grow
by 3.3% this year, then slow to a more modest +2.2% pace in 2011. The
German government’s forecasts are for growth of 3.4% this year and +1.8%
next year.

The ZEW’s forecasts point to a growth rate of +2.2% in 2011. “But
in fact the dynamics of economic growth will be considerably lower,”
Franz warned.

The ZEW’s economic expectations indicator for the Eurozone as a
whole increased 12 points to +13.8, while the current conditions
index rose by a far more modest 0.1 point to -1.0.

Earlier this month, the Sentix research group reported that its
Eurozone investor sentiment index surprised to the upside, hitting a
three-year high of +14 after October’s +8.8. The current conditions
component rose to 21.75 from 15.0.

Two hundred and seventy-seven analysts and investors were polled
between November 1st and 15th, the ZEW said, down from last month’s 282
respondents.

— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —

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