RTTNews - German economic sentiment improved in August rebounding from a fall in July as the surprising economic recovery in the second quarter boosted financial market experts' confidence, a closely watched report revealed Tuesday.

A repeated rise of incoming orders and increasing exports have brightened the economic perspectives for Germany in the next months, the Mannheim-based ZEW or the Center for European Economic Research said.

The economic sentiment indicator rose sharply to 56.1 in August, the highest since April 2006, from 39.5 in July, above the expected reading of 45. The ZEW said this value is well above the indicator's historical average of 26.5.

Good economic data and again significantly higher equity prices further boosted the analysts' optimism. A further perceptible upward movement is to be expected for the months ahead, Commerzbank analyst Simon Junker said.

The German economy unexpectedly expanded in the second quarter, recovering from its worst recession since the Second World War. Gross domestic product rose 0.3% sequentially in the second quarter after declines in previous four quarters.

With regard to the future movement of the ZEW indicator, the analyst said, the upward movement will continue with perceptible increases until this indicator reaches its 'normal' high of about 80 points this autumn.

ZEW President Wolfgang Franz said, 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.

The German economy develops parallel to the world economy and should, hence, recover only gradually, Franz added.

The biggest Eurozone economy started contracting in the second quarter of 2008 and slipped into a recession in the third quarter that continued into the first quarter of this year.

The German government led by Chancellor Angela Merkel has been pouring billions of euros to shore up the recession-hit economy. Growth in the second quarter would provide relief for Merkel as she faces election in September this year.

The government expects the economy to shrink around 6% in 2009, but the surprising expansion in the second quarter may force it to reconsider its outlook.

Recently, European Central Bank Governing Council member Axel Weber said the Bundesbank, Germany's central bank, expects the economy to perform better than they envisaged in the third quarter.

Weber, who also heads the Bundesbank, noted that the full year economic contraction would be less than the bank's forecast for a 6% fall.

The ZEW indicator for current economic situation improved significantly in August. The corresponding indicator increased by 12.1 points to minus 77.2, while it was expected to rise to minus 85 from the July reading of minus 89.3.

In line with the increase of the overall economic expectations for Germany, the expectations for all surveyed sectors and for the export-oriented sectors particularly, have noticeably improved, the ZEW said.

Moreover, the think tank said the economic expectations for the Eurozone rose 15.4 points to 54.9 in August and the indicator for the current economic situation for the region rose to minus 82.1 from minus 90.7.

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