German investor confidence jumped more than economists forecast to a seven-month high in December on speculation Europe’s largest economy will gather momentum next year.
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, climbed to 6.9 from minus 15.7 in November. Economists predicted a gain to minus 11.5, according to the median of 38 estimates in a Bloomberg News survey.
The German economy will contract this quarter and stagnate in the first three months of next year as the sovereign debt crisis curbs demand for its goods in the euro area, the Bundesbank forecast last week. Still, the benchmark DAX share index has rallied more than 17 percent since the European Central Bank pledged on July 26 to save the euro and unveiled an unlimited bond-purchase program. Business confidence unexpectedly rose in November.
Germany faces “a very favorable environment, largely on the back of expansionary monetary policy,” said Ralph Solveen, head of economic research at Commerzbank AG in Frankfurt. “Should the sovereign debt crisis continue to ease in the next few months as we expect, this implies a significant revival of the economy in the course of 2013.”
ZEW’s gauge of the current economic situation rose to 5.7 from 5.4 in November. The euro gained after the report to trade at $1.2965 at noon in Frankfurt, up 0.2 percent today.
European stocks advanced for a seventh day before Federal Reserve policy makers start their two-day meeting. The Stoxx Europe 600 Index (SXXP) rose 0.3 percent to 280.33.
German economic growth slowed to 0.2 percent in the third quarter from 0.3 percent in the second as the euro area slipped into recession for the second time in four years.
The ECB last week forecast the 17-nation euro economy will contract 0.3 percent in 2013, leaving the door ajar for further interest-rate reductions, and the Bundesbank slashed its forecast for German growth to 0.4 percent from 1.6 percent.
“The latest data suggests that the Bundesbank and the ECB may have become a bit too pessimistic,” said Christian Schulz, senior economist at Berenberg Bank in London. “This could spring positive surprises for them in the New Year and thus reduce the likelihood of any further rate cut.”
While Germany’s economy will “continue to cool into 2013,” it “will not have to face a recession,” ZEW President Wolfgang Franz said in a statement. “However, that’s only as long as the crisis in the euro zone doesn’t deepen once again.”
As demand wanes from the euro area, Germany’s biggest export market, some companies are compensating with exports to faster growing markets outside Europe.
Shipments from Germany to non-European Union countries increased 9.9 percent in the third quarter from a year earlier, the Federal Statistics Office said last week, with those to the U.S. surging 25.7 percent. Deliveries to EU member states declined 0.9 percent while exports to other euro-area nations fell 3 percent.
Bayerische Motoren Werke AG, the world’s biggest maker of luxury cars, last month posted third-quarter earnings that exceeded analyst expectations, helped by growth in the U.S. and Asia. BMW-brand deliveries increased 26 percent to 145,452 cars and SUVs in November, the Munich-based manufacturer said yesterday.
Still, “the situation in the euro area represents quite some risk for the German economy,” said Lothar Hessler, an economist at HSBC Trinkaus & Burkhardt AG in Dusseldorf. “The latest numbers for industrial production are quite worrisome. I expect a significant economic contraction in the fourth quarter.”
German production fell 2.6 percent in October from September, when it declined 1.3 percent, the Economy Ministry said on Dec. 7.
In the euro area, services and manufacturing output shrank for a 10th month in November, London-based Markit Economics said last week, adding that “France, Spain and Italy continue to see strong contractions.”
General Motors Co. (GM:US)’s Opel division announced yesterday it will stop making cars at its plant in Bochum, Germany, in 2016 as the U.S. automaker seeks to stem European losses.
U.S. Federal Reserve policy makers begin a two-day meeting today and will publish updated projections on economic growth, unemployment, inflation and interest rates tomorrow.
Officials are considering whether to supplement $40 billion a month of mortgage-bond buying with Treasury purchases when their Operation Twist program expires at the end of the month. Reports on the trade balance and small business optimism are due later today.
In Asia, Indonesia’s central bank kept its benchmark interest rate unchanged for a 10th month while in Australia, a private survey showed business confidence plunged last month to the lowest level since 2009.
In the U.K., a house price gauge declined in November, remaining around a level indicating “broadly flat” values, the Royal Institiution of Chartered Surveyors said.
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