German analyst and investor sentiment rose in November for the first time in almost a year, surpassing expectations and raising hopes of an improvement in Europe’s biggest economy after it dodged recession in the third quarter.
The euro rose to a day high against the dollar and Bund futures reversed gains after the survey was published yesterday, although economists warned against reading too much into the rise as the index was still at a low level.
Mannheim-based think tank ZEW’s monthly survey of economic sentiment rose to 11.5 points from minus 3.6 points in October, way over the consensus forecast in a Reuters poll of analysts for a rise to 0.5 points. It was the first rise since December last year.
“The recent eurozone growth figures suggest that the economy is stabilising which contributed to the ... increase,” said ZEW president Clemens Fuest, adding, however that the climate remained fragile due to ongoing political tensions.
Germany’s export-oriented economy has been hit by mounting tensions with Russia over the Ukraine crisis and also, to a lesser degree, by the conflicts in the Middle East.
In October, the ZEW index plunged to its lowest level in almost two years and organisations — including the OECD and the IMF — have slashed their growth forecasts.
The government expects expansion of just 1.2% this year and 1.3% in 2015.
However, data released last week showed the German economy just avoided recession in the third quarter thanks to a strong rise in consumer spending and a small boost from foreign trade. It had shrunk in the second quarter.
Jennifer McKeown, senior European economist at Capital Economics, warned against placing too much weight on one monthly increase in a volatile survey. “On balance, the survey suggests that Germany will soon be leading the eurozone recovery again, but with modest growth that will fail to ensure a meaningful revival in the rest of the region,” she said.
A separate index of current conditions rose to 3.3 points in November from 3.2 points in October, also beating the consensus forecast of 1.8 points. The index was based on a survey of 220 analysts and investors and conducted between Nov 3 and Nov 17.
Last month, the ZEW index saw investor morale fall below zero for the first time in nearly two years, suggesting at the time that Europe’s largest economy was still reeling from crises abroad and a weak overall eurozone, while weak domestic data also weighed on sentiment.
October’s fall marked a tenth consecutive month of negative reading and signalled that investors were expecting the German economy to continue weakening over the medium term.