Investor confidence in Germany, Europe's biggest economy, rose sharply in August as hopes grew that the economy will recover faster than previously expected, a closely-watched survey showed Tuesday.
The ZEW Center for Economic Research in Mannheim said its monthly index, which measures investors' outlook for the next six months, rose to 56.1 points in August from 39.5 points in July — well above the historical average of 26.5 points.
Germany's export-dependent economy sank into recession last year as the global downturn dried up demand for its manufactured goods.
But last week, the country reported a 0.3 percent increase in growth in the second quarter compared with the previous quarter, technically lifting it out of its worst recession in decades.
The ZEW said the positive growth figures for gross domestic product have led to a better assessment of the current economic situation in Germany. The ZEW said all sectors for the German economy and particularly the export-oriented sectors have noticeably improved.
"The recent development of the GDP shows that the previous expectations of the financial market experts have come true. There is, however, no reason for euphoria," ZEW President Wolfgang Franz warned in a statement.
"The German economy develops parallel to the world economy and should, hence, recover only gradually," he said.
The ZEW said that subindex of the current economic situation in Germany improved in August by 12.1 points to minus 77.2 points from minus 89.3 points in July.
UniCredit economist Andreas Rees said in an analysis of the results that the expectations figure was the highest reading since April 2006 and the ninth increase in the last 10 months, soundly beating forecasts.
Still, Rees said that although leading indicators are likely to increase further, he expects a setback in growth, with slower momentum in 2010.
"Unfortunately, the latest ZEW cannot give an answer to the million-dollar question whether this is really a sustainable upswing. We have to be patient and wait for more sentiment data in the months to come," he said.
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