Sept. 18 (Bloomberg) — German investor confidence rose for the first time in five months in September after the European Central Bank unveiled a plan to buy government bonds to stem the sovereign debt crisis.
The ZEW centre 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 minus 18.2 from minus 25.5 in August. Economists forecast a gain to minus 20, according to the median of 41 estimates in a Bloomberg News survey.
German stocks have risen to a 14-month high since the ECB said on Sept. 6 it may buy unlimited amounts of government bonds to contain yields in countries that seek assistance from Europe’s bailout fund. Market sentiment has also been boosted by Germany’s constitutional court clearing the way for ratification of the permanent rescue fund and the U.S. Federal Reserve’s announcement of a third round of asset purchases to stimulate growth and employment in the world’s largest economy.
“It looks like the market thinks the worst may be over and that from now on the crisis is more manageable,” said Jens Kramer, an economist at NordLB in Hanover. “Even though the outlook for the German economy this year is a bit subdued because of the impact of the crisis, at least Germany will avoid a recession.”
Growth in Europe’s largest economy will slow to 0.8 per cent this year from 3 per cent last year before picking up to 1.1 per cent in 2013, the Kiel-based Institute for the World Economy said on Sept. 13. The pace of expansion eased to 0.3 per cent in the second quarter from 0.5 per cent in the first as budget cuts and recessions in euro-area trading partners eroded demand for German exports.
Germany’s Volkswagen AG, Europe’s largest carmaker, has reduced its internal sales forecast for 2012 by as many as 100,000 vehicles as a result of the debt crisis, according to a person familiar with the matter.
Still, industrial production, factory orders and exports all rose in July, suggesting the economy made a good start to the third quarter. Unemployment at a two-decade low is also bolstering domestic demand, helping Germany to outperform its neighbours.
At least five of the 17 nations using the euro are in recession, including Spain and Italy. The European Commission forecasts a 0.3 per cent contraction for the region as a whole this year.
While additional stimulus from the ECB and the Fed may improve sentiment, “the fundamental outlook remains challenging, especially given the global trade cycle,” said Nick Matthews, a senior European economist at Nomura International in London.
After the ECB injected more than 1 trillion euros ($1.3 trillion) into the banking system earlier this year, “the ZEW jumped about 30 points, but then we had an escalation in market tensions and it took back all that ground,” Matthews said.
–With assistance from Kristian Siedenburg in Vienna and Jana Randow and Stefan Riecher in Mannheim. Editors: Matthew Brockett, Simone Meier
To contact the reporter on this story: Gabi Thesing in London at [email protected]
To contact the editor responsible for this story: Matthew Brockett at [email protected]
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