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German Investor Confidence Rebounds, But Still Low

DPA news agency (df)November 11, 2008

A key economic indicator shows German investor confidence still low, although it got a slight boost from Merkel's bank rescue package

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Image: AP

German investor confidence rebounded from record lows with a key indicator released Tuesday posting a surprise increase in November amid government and central bank moves to shore up the economic outlook.

Drawn up by the Mannheim-based Center for European Economic Research, the ZEW index rose to minus 53.5, rebounding from minus 63 in October amid signs that an element of calm has returned to global share markets after weeks of chaotic selling.

Analysts had forecast that the indicator would remain at about minus 63 in October. The survey represents a key test of sentiment in Europe's biggest economy amid fallout from the world financial crisis.

Shoring up confidence

The 50-billion-euro ($65 billion) economic stimulus plan and the 500-billion-euro bank rescue package unveiled by Chancellor Angela Merkel's government in recent weeks also helped to steady investor nerves.

In addition, the release of the ZEW survey came in the wake of a wave of global rate cuts and a weaker euro against the US dollar.

"The earlier pessimistic expectations of the financial market experts are confirmed by the current economic development in Germany," ZEW President Wolfgang Franz said upon the survey's release.

"The experts, however, seem hopeful that the collective actions of governments and central banks will mitigate the economic slowdown," he added.

Well below historical average

The release of the ZEW survey comes after the index plunged in October amid deepening economic fears following the global share market sell off. However, the ZEW indicator still remains well below its historical average of 27.1 points.

The release of the index comes ahead of the publication on Thursday of official data showing Germany slumping into a recession during the third quarter.

The German economy shrank by 0.5 per cent in the second quarter, with analysts expecting that upcoming figures from Germany's statistics office to show a further 0.1 percent contraction in the quarter which ended September 30.

As a result, Germany will fulfill the technical definition of recession after clocking up two consecutive quarters of negative growth.