Economy

German investor sentiment hits two-year high as risks fade

Improving euro zone outlook has boosted German export prospects

Data will boost Chancellor Angela Merkel before the September 24th federal election. Photograph: Sean Gallup/Getty Images

Tue May 16 2017 - 11:21

The mood among German investors improved further in May to reach its highest since July 2015, a survey showed on Tuesday, in a further sign that political uncertainties that clouded the growth outlook for Europe’s biggest economy are evaporating.

The Mannheim-based ZEW research institute said its monthly survey showed its economic sentiment index rose to 20.6 from 19.5 points in the previous month. The Reuters consensus forecast was for a rise to 22.0.

The positive sentiment reading came as the economy picked up speed in the first quarter of 2017. Companies invested more, consumers and the state continued to spend and exports soared despite the threat of rising protectionism. Germany’s economy, Europe’s biggest, grew by 0.6 per cent from the quarter before, when it expanded 0.4 per cent, the Federal Statistics Office said last Friday.

“The latest figures on gross domestic product confirm that the German economy is in good shape,” ZEW president Achim Wambach said in a statement. “The prospects for the euro zone as a whole are gradually improving, further strengthening the economic environment for German exports.”

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Solid data

A separate gauge measuring investors’ assessment of the economy’s current conditions rose to 83.9 points from 80.1 in April. This compared with the Reuters consensus forecast, which predicted a reading of 82.0. The upbeat ZEW report is the latest in a batch of solid data that are likely to help Chancellor Angela Merkel and her conservatives burnish their economic credentials before a September 24th federal election, when she will seek a fourth term.

Merkel received a boost on Sunday when her party won a regional election in the populous western state of North Rhine-Westphalia, home to one in five German voters and often seen as an indicator of national electoral trends. The result put Merkel on course to retain power, welcome news for investors who regard her as an anchor of stability.

“Fading political risks, low inflationary pressure, low interest rates and comfortable stock markets are feeding investors’ optimism,” said ING economist Carsten Brzesk.

– Reuters

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