Investors’ sentiment for the German economy jumps to the highest level in almost a year, the latest evidence that confidence is building as a squeeze from soaring energy prices eases.
(Bloomberg) — Investors’ sentiment for the German economy jumps to the highest level in almost a year, the latest evidence that confidence is building as a squeeze from soaring energy prices eases.
The ZEW institute’s gauge of expectations rose to 16.9 in January from -23.3 in the previous month — better than any estimate in a Bloomberg survey of 27 economists. That reading means the gauge is now near its 10-year average.
“For the first time since February 2022, the month in which the war in Ukraine began, the indicator points to a noticeable improvement in the economic situation over the next six months,” said ZEW President Achim Wambach. “The more favorable situation on the energy markets and the German government’s energy price caps have contributed to this in particular.”
Mild weather has reduced the risk of natural-gas shortages this winter and storage remains well-filled. That’s helped lower prices to levels last seen before Russia’s invasion of Ukraine.
Wambach highlighted the positive impact of China’s reopening on German exports and a potential boost of consumer related sectors from a falling inflation rate.
Output in Europe’s largest economy probably stagnated in the fourth quarter, the German statistics office said Friday, as private consumption remained resilient against the fastest inflation in decades. The period was widely expected to mark the beginning of a recession.
“We had three mild weeks but before that we had three tough weeks,” Vice Chancellor Robert Habeck told Bloomberg Television’s Francine Lacqua in Davos. “The crisis isn’t over, but we can handle the crisis.”
Still, a recession — defined as two consecutive quarters of contraction — might be avoided, he said.
“It could be that we just slip away” from that scenario, Habeck said. “But this is not good enough.”
Factories, meanwhile, are supported by a large backlog of orders and an easing of logistical snarls that plagued the sector during the pandemic. That’s led Volkswagen AG to predict sales growth this year, despite a sputtering global economy.
–With assistance from Kristian Siedenburg, Joel Rinneby, Kamil Kowalcze and Craig Stirling.
(Updates with Habeck starting in seventh paragraph)
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