Germany Expectations Current Conditions
————————————————————-
December +4.3 +82.6

MNI survey median: +3.8 +84.0
MNI survey range: -5.0 to +11.8 +79.0 to +88.0

November +1.8 +81.5
—

FRANKFURT (MNI) – Financial experts’ outlook for the German economy
at the six-month horizon improved more than generally expected in
December, but their assessment of current conditions was weaker than
most analysts had forecast, the European Economic Research (ZEW)
reported Tuesday.

ZEW’s expectations index rose another 2.5 points to +4.3, the
second month of recovery after six months of decline. Most analysts had
expected a slightly smaller rise. The MNI survey median was for +3.8.

“In October industrial production and incoming orders have
developed favourably in Germany and have thus been strengthening
economic recovery,” ZEW explained in a press release.

“Nevertheless, necessary budget consolidations across many
countries in Europe and the prospect of a more contractionary monetary
policy in China are among the risk factors for German exports,” it
warned.

“After a strong increase in the previous month, economic
expectations for Germany seem to stabilise in December,” added ZEW
president Wolfgang Franz. “Besides impulses from export activities,
economic stimulus is also expected from domestic demand, supported by a
positive labour market development and low real interest rates.”

The index for current conditions in Germany rose 1.1 points to
+82.6, below the MNI survey median forecast of +84.0.

Germany is expected to outperform most developed economies this
year. The Bundesbank forecasts growth of 3.6% this year and 2.0% next
year — enough to return to the pre-crisis level of activity by the end
of 2011. Growth is expected to slow further to 1.5% in 2012.

The Organization for Economic Cooperation and Development is more
upbeat, calling for 3.6% GDP growth in 2010, +2.5% in 2011 and +2.0% in
2012. “The outlook over the projection horizon is fairly bright,” it
said last month.

The Ifo Institute announced Tuesday that it expects German GDP to
grow at 3.7% this year, followed by +2.4% in 2011.

While exports are still expected to support German growth going
forward, improving employment prospects and rising wages should boost
domestic demand over the medium term.

“With consumer sentiment powering towards the end of the year and
good conditions such as falling unemployment and moderate price
development, the foundations have been laid for an even more impressive
2011 in terms of the consumer climate,” the research group GfK said last
month.

ZEW’s economic expectations indicator for the Eurozone rose 1.7
points in December to +15.5, while current conditions declined 3.6
points to -4.6.

Two hundred sixty-six analysts and investors were polled between
November 29 and December 13, ZEW said, down from last month’s 277.

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

[TOPICS: M$G$$$,MT$$$$,M$X$$$,M$XDS$,MAGDS$]