Germany Expectations Current Conditions
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October -7.2 +72.6

MNI survey median: -9.0 +60.0
MNI survey range: -15.0 to +3.0 +50.0 to +65.0

September -4.3 +59.9

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MANNHEIM, Germany (MNI) – Analysts’ six-month outlook for the
German economy worsened less than generally expected in October, the
Center for European Economic Research (ZEW) reported Tuesday.

The ZEW’s indicator of economic sentiment in Germany fell 2.9
points to -7.2, its sixth straight fall. Still, the figure was above
most analysts’ forecasts and exceeded the MNI median forecast of -9.0.

Following the release, December Bunds fell and the euro gained
versus the dollar. Investors likely interpreted the data to show that
the slowdown in the Eurozone’s largest economy might not be so
pronounced.

“Recent figures on industrial production and incoming orders prove
that German economic growth remains robust,” ZEW wrote. “During the last
months the German economy has recovered from the financial crisis with
exceptional growth rates.”

Still, the decline in the expectations indicator in October shows
“that compared to the period of rapid recovery, economic growth is
likely to slow down in the next six months,” it said.

“More than half of the financial market experts expect no change of
the economic situation in Germany within the next half year,” ZEW said.
But weak economic dynamics in the United States and some Eurozone
countries “remain major risks.”

The current conditions indicator rose 12.7 points in October to
+72.6, above all forecasts in the MNI survey.

Most forecasters expect the German economy to outshine its Eurozone
peers this year, although the pace of growth is expected to moderate
after the second quarter’s astonishing 2.2% GDP surge.

On Monday, the Bundesbank said that growth would likely exceed 3%
this year, noting that domestic demand is steadily increasing in
importance. Economics Minister Rainer Bruederle also forecast growth of
more than 3%.

Last week, Germany’s six leading economic institutes predicted that
GDP growth this year will be 3.5%.

While Germany has surely been helped by the rebound in global
growth, a recovery in domestic demand should cushion some of the impact
from the slowdown in global activity.

Today’s ZEW result comes three days ahead of Ifo’s widely watched
business sentiment indicator, which has recently surprised to the
upside. In September, the headline indicator rose for the fourth
straight month, as the improvement in current conditions outweighed a
further erosion in the six-month outlook.

For October, most experts expect a slight decline in the main Ifo
indicator and a bigger fall in the forward-looking component.

The ZEW’s economic sentiment index for the Eurozone as a whole fell
2.6 points to 1.8, while current conditions gained an additional 5.2
points to end at -1.1.

A total of 282 analysts were polled in this month’s survey,
conducted between October 4 and October 18, up from last month’s 277
respondents, ZEW said.

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

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