German investor outlook unexpectedly improves for sixth month

GERMANY’S investor outlook improved for a sixth month – surprising analysts and signalling hope that Europe’s biggest economy will be able bounce back from a contraction at the end of last year.

An expectations index by the ZEW institute rose to 15.2 in January from 12.8 the previous month – defying analyst predictions for a drop, data showed on Tuesday (Jan 16). A measure of current conditions inched down.

“More than half of those surveyed assume that the European Central Bank will cut interest rates in the first half of the year,” ZEW president Achim Wambach said, adding that December’s uptick in inflation hadn’t altered those expectations.

The slow improvement in sentiment suggests a mild rebound in activity is possible following Germany’s first annual downturn since the pandemic. Manufacturing, though, remains stuck in a rut – plagued by the aftermath of the energy crisis and weak global demand.

The Bundesbank predicts gross domestic product will rise by just 0.4 per cent this year. Analysts at Deutsche Bank and Commerzbank see output continuing to shrink, following a 0.3 per cent contraction in 2023.

Adding to the economic headwinds, Germany is beset by rail strikes and protests by farmers angry about the removal of subsidies – a consequence of budget restructuring in Berlin following a shock court ruling in November. BLOOMBERG