Bloomberg News

German Investor Sentiment Unexpectedly Rose in December: Economy

December 13, 2011

Dec. 13 (Bloomberg) -- German investor confidence unexpectedly rose for the first time in 10 months in December, indicating Europe’s largest economy is weathering the region’s debt crisis.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to minus 53.8 from a three-year low of minus 55.2 in November. Economists forecast a drop to minus 55.8, the median of 34 estimates in a Bloomberg News survey shows.

While the debt crisis is threatening to tip the 17-nation euro region into recession, Germany is showing few signs of slowdown. Industrial production rose more than economists forecast in October, manufacturing orders rebounded and unemployment declined in November, pushing the jobless rate to a seasonally adjusted 6.9 percent.

“Things don’t look so bad at company level,” said Thilo Heidrich, an economist at Deutsche Postbank AG in Bonn, who predicted the ZEW index would increase. “The economic situation isn’t as bad as the debt crisis would suggest. We don’t expect a clear or deep recession in Germany, and that’s reflected in this slight improvement in expectations.”

The euro rose to $1.3225 at 12:25 p.m. in Frankfurt from $1.3170 before the ZEW report. ZEW’s gauge of current conditions fell to 26.8 from 34.2 in November.

Gloomy Outlook

“The slight improvement in confidence may prove temporary,” said Christian Schulz, an economist at Berenberg Bank in London. It mainly reflects “hopes ahead of last week’s European Union summit that a positive outcome could trigger more action from the European Central Bank to stop the market panic,” he said.

Germany’s benchmark DAX Index dropped 1.6 percent last week, taking its annual decline to 15 percent, after the ECB on Dec. 8 lowered its euro-region growth forecast for 2012 to 0.3 percent from 1.3 percent and damped speculation it will buy more government bonds to curb the debt turmoil.

Germany may slip into a “technical” recession, with gross domestic product declining this quarter and next, the Berlin- based DIW institute said on Nov. 30.

Infineon Technologies AG, Europe’s second-largest maker of semiconductors, on Nov. 16 forecast a steeper decline in sales than analysts’ projections. Metro AG fell the most since its 1996 initial public offering on Dec. 6 after Germany’s biggest retailer forecast that sales and earnings will fall this year.

Business Confidence

Still, the Ifo institute’s business confidence gauge rose for the first time in five months in November, and GfK SE predicted consumer confidence will increase in December.

BASF SE on Nov. 29 raised its sales target for the end of this decade, citing emerging-market growth. Juergen Geissinger, chief executive officer of Schaeffler AG, the roller-bearing maker that controls Continental AG, said last month that global orders “remain solid.”

ZEW President Wolfgang Franz said the index shows that investors and financial market experts “expect economic activity to slow down, but not to plunge during the next six months.”

Europe’s debt crisis is hurting the global economy by cutting demand for exports from nations such as China. Chinese economic growth cooled to 9.1 percent last quarter, the least in more than two years, and the increase in exports in November was the weakest since 2009 excluding seasonal distortions.

Global Trade

In the latest sign of a slowdown in global trade, Philippine exports fell in October for a sixth straight month, a report released in Manila showed today.

Federal Reserve policy makers meet later today to discuss the outlook for a U.S. economy that has strengthened since their November meeting, reducing the jobless rate to 8.6 percent from 9.1 percent. U.S. retail sales data for November are also due, with the median forecast in a Bloomberg News survey showing a 0.6 percent gain after a 0.5 percent increase in October.

The Federal Open Market Committee is set to release a statement at around 2:15 p.m. Washington time.

At a Brussels summit on Dec. 8-9, European leaders agreed to bolster efforts to fight the debt crisis and tighten fiscal rules. While the ECB the same week stepped up its provision of liquidity to banks, it said responsibility for overcoming the crisis lies with governments.

Standard & Poor’s placed the ratings of 15 euro nations, including AAA-rated France and Germany, on review for possible downgrade on Dec. 6 pending an assessment of the summit. Moody’s Investors Service said yesterday it will review the ratings of all EU countries after leaders failed to produce “decisive policy measures” to end the turmoil.

“The debt crisis is still waiting to be solved and this may be the case for quite some time,” said Carsten Klude, head of investment strategy at M.M. Warburg & Co. in Hamburg. German investor confidence will probably decline in the coming months, he said.

--With assistance from Ragnhild Kjetland in Frankfurt, Mark Deen in Paris, Jennifer Ryan in London and Kristian Siedenburg in Vienna. Editors: Matthew Brockett, Alan Crawford

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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