German investor confidence improved for a third month — signaling hope that an end to more than a year of interest-rate increases can help Europe’s biggest economy overcome its current weakness.
(Bloomberg) — German investor confidence improved for a third month — signaling hope that an end to more than a year of interest-rate increases can help Europe’s biggest economy overcome its current weakness.
The ZEW institute’s gauge of expectations rose to -1.1 in October from -11.4 in September — better than economists had predicted in a Bloomberg survey. An index of current conditions worsened a little.
“It seems that we have passed the lowest point,” ZEW President Achim Wambach said Tuesday in a statement. “The heightened economic expectations are accompanied by the anticipation that inflation rates will decrease further and the fact that now more than three-quarters of respondents anticipate stable short-term interest rates in the euro zone.”
While Germany is facing a downturn in the second half of 2023 following the winter slump triggered by Russia’s invasion of Ukraine, a rebound is on the cards for next year. The government sees growth picking up to 1.3%, as cooling inflation and rising wages help revive domestic demand, though analysts polled by Bloomberg expect only a feeble recovery.
Higher borrowing costs have been hurting consumers and businesses, but the European Central Bank has signaled that interest rates have probably reached a plateau.
Germany’s sluggish performance this year has drawn attention to structural headwinds — ranging from an outsized reliance on China to the rapid aging of its population. Oya Celasun, deputy director of the International Monetary Fund’s European department, told reporters Friday in Marrakech that the institution sees “long standing challenges to growth.”
Finance Minister Christian Lindner pushed back on such pessimism at the IMF annual meetings last week, saying “prophecies of doom are inappropriate” because of Germany’s “enormous turnaround potential and solid economic foundations.”
–With assistance from Joel Rinneby and Kristian Siedenburg.
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