May 16, 2017 / 10:05 AM / 4 months ago

German investor morale hits near two-year high as risks fade

FILE PHOTO: The famous skyline with its banking district is pictured in early evening next to the Main River in Frankfurt, Germany, January 19, 2016. REUTERS/Kai Pfaffenbach/File Photo

BERLIN (Reuters) - 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 which 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 percent in the quarter from the quarter before, when it expanded 0.4 percent, 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,” he added.

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 Sept. 24 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 Brzeski.

Reporting by Michael Nienaber and Paul Carrel; Editing by Michelle Martin and Raissa Kasolowsky

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