German economic sentiment improved in March defying economists' expectations, as the European Central Bank resumed interest rate cut and commodity prices decrease, a closely watched survey of financial experts revealed Tuesday.
The Mannheim-based Centre for European Economic Research, or ZEW, said its economic sentiment indicator for Germany rose 2.3 points to minus 3.5 in March, the highest since July 2007. It also marked the fifth consecutive month of increase. Economists had forecast a decline to minus 8 from minus 5.8 recorded in the previous month. However, the indicator is still below its historical average of 26.2.
The ZEW said the indicator's upward movement, which was very dynamic during the last four months, slowed down in March. However, the improvement strengthens the impression that experts are more hopeful with respect to the economic development in Germany on a six months time horizon.
In March, the ECB lowered its key interest rate by half a percent to a record low of 1.5% after keeping the rate on hold at 2% in February. The ECB has now cut its rate by a cumulative 275 basis points since early October 2008.
ZEW President Wolfgang Franz said, "According to the financial market experts, the economic slowdown is gradually phasing out. The bottom of the recession is likely to be reached this summer. The economic situation is extremely bad, but there are first signs of hope. They should not be played down."
According to Simon Junker, an analyst at the Commerzbank, the rise in the economic sentiment suggests that analysts increasingly see an improvement coming in the present disastrous state of the economy in the second half of the year.
Similar to previous months, the current economic situation indicator for Germany dropped to minus 89.4 from minus 86.2, while the consensus forecast was minus 90.
"After past week's miserable figures on order intake and production in the manufacturing sector, the decline of the assessment component is not surprising. Instead - as is usual in recessions - it is approaching the lower," Junker said.
Last week, Germany's Federal Ministry of Economics and Technology had said that industrial production in January declined the most since the reunification of Germany in 1990 and new orders tumbled on a seasonally adjusted annual basis.
The Commerzbank analyst stated, "GDP, will contract sharply in the current quarter and a decline is also likely in the second quarter. The economy is only set to grow again towards the end of the year, although probably by not enough to stop the rise in unemployment."
In the fourth quarter, the largest Eurozone economy experienced the biggest sequential contraction since the reunification in 1990 on plunging exports. The economy shrank 2.1% sequentially in the fourth quarter, after contracting 0.5% in the third quarter.
Further, the ZEW said its economic expectation indicator for Eurozone increased by 2.2 points to minus 6.5. The indicator for the current economic situation in Eurozone rose 0.3 points to minus 90.7.
For comments and feedback: contact
editorial@rttnews.com
Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved
News are provided by InstaForex in partnership with RTT.