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German morale dips but remains high

Tuesday, January 21 11:55:15

German analyst and investor sentiment unexpectedly cooled in January on slightly lower expectations for private consumption, but it remained near the highest level in nearly eight years.

The monthly ZEW think-tank survey, released today, showed, however, that investors' assessment of current conditions rose more than expected. ZEW said this confirmed high expectations of recent months for Europe's largest economy.

It also jumped for the broader euro zone in the survey.

ZEW's poll of economic sentiment slipped to 61.7 after jumping to 62.0 in December, sending the euro to a session low against the dollar. The consensus forecast in a Reuters poll of analysts last week was for a rise to 64.0.

"The German sentiment reached a plateau, it is on a historically high level," said ZEW economist Marcus Kappler.

Capital Economics analyst Jonathan Loynes said the fall in the headline indicator was a "bit of a surprise" but reversed only a fraction of December's gain and "leaves the index still within a whisker of its highest level since April 2006".

Other recent sentiment indicators have been upbeat, with surveys showing business morale hitting its highest level since April 2012 and the mood among consumers at its strongest level in nearly 6-1/2 years.

The German economy was a bastion of strength during the early years of the euro zone crisis, far outperforming its peers. But it slowed over the past two years as demand for German exports fell in the wake of a global slowdown and firms became nervous, deterring investment.

But hard data for the German economy has been positive of late. Industrial input and orders rose more than expected in November, while exports rose for the fourth month running and retail sales were up.

So economists now expect expansion of around 1.7 percent in 2014 after 0.4 percent in 2013.