German Investor Confidence Jumps as Economic Recovery Takes Hold

(Bloomberg) — Investor confidence in Germany’s economy rose for a 10th month — reflecting optimism that growth is returning after more than a year of near-stagnation.

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An expectations gauge by the ZEW institute increased to 47.1 in May from 42.9 in April — more than the 46.4 seen by analysts in a Bloomberg survey. A measure of current conditions also topped estimates.

“Signs of an economic recovery are growing, bolstered by better assessments of the overall eurozone and of China as a key export market,” ZEW President Professor Achim Wambach said in a statement. “The increased optimism is reflected in particular in the sharp rise in expectations for domestic consumption, followed by the construction and machinery sectors.”

The prospects for Europe’s biggest economy have brightened recently, with surveys pointing to an improving mood especially in the services sector. Consumers benefiting from slower inflation and rising incomes are expected to be a key force behind this year’s recovery.

Persistent weakness in Germany’s important manufacturing sector highlights ongoing fragility, however. Industrial production fell for the first time in a year in March, while orders unexpectedly dropped.

Interest-rate cuts by the European Central Bank are expected to provide some relief, though their impact won’t filter through until later in the year. Analysts are also counting on global demand to lift German exports.

–With assistance from Joel Rinneby and Kristian Siedenburg.

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