Germany's economic sentiment in April turned positive for the first time since July 2007, signaling that measures to shore up the biggest Eurozone economy from the worst recession since the World War II are taking effect.
Tuesday, the Center for European Economic Research, or ZEW, said its economic sentiment index for Germany rose to 13 in April from minus 3.5 in March. It was the sixth consecutive month of increase. Meanwhile, economists had expected the index to rise to 2.
The sentiment indicator is positively affected by the government stimulus packages, which are increasingly effective, the ZEW said in a statement. Furthermore, low inflation rates support private consumption.
The index thus gives a clear sign of a turnaround of the Germany economy, Commerzbank analyst Ralph Solveen said. But, he said a potentially dynamic upwards momentum of the leading indicators as the ZEW shows does not necessarily mean a dynamic upswing economic growth. For the moment, it only suggests that we could be over the worst in a few months' time.
The monthly ZEW economic sentiment survey is undertaken among 350 financial experts and the sentiment indicator reflects the difference between the share of analysts that are optimistic and the share of analysts that are pessimistic for the expected economic development in Germany in six months.
According to the financial market experts surveyed, the economic outlook for the United States has improved. In addition, there are some slightly positive impulses from other countries such as China.
Along with other indicators, the ZEW sentiment indicator reveals that there are well-founded expectations that the downward dynamics of the business cycle are bottoming out, ZEW President Wolfgang Franz said. It is even becoming more likely that the economy will slowly recover in the second half of this year.
Meanwhile, the assessment of the current economic situation in Germany deteriorated again. The corresponding indicator dropped 2.2 points to minus 91.6.
The Ifo expectations index, due on Friday, could give a clear picture of the direction of the German economy. The Commerzbank analyst said if it rises for the fourth month in succession, turnaround of the economy would be much clear.
Further, the economic expectations for the Eurozone increased to 11.8 from minus 6.5 in March, while the current situation index dropped by 2.3 points to minus 93, the ZEW survey found.
Earlier in the day, Germany's Federal Statistical Office said the producer price index, or PPI, fell 0.5% annually in March, the lowest year-on-year rate since September 2002.
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