German investor confidence unexpectedly rose in April, calming fears that the euro zone's sovereign debt crisis is weighing down the No. 1 economy in the monetary union, according to a report from Mannheim, Germany-based Centre for European Economic Research, or ZEW.
The ZEW's indicator of economic sentiment, which tracks the expectations of investors and analysts, regarding the German economy in the coming six months, increased by 1.1 points to 23.4 points in April, well above Bloomberg's consensus expectations of a drop to 19. It also represented the fifth consecutive monthly rise.
Economic expectations have stabilized... financial market experts surveyed by ZEW in general expect a further positive development of the German economy, stated the research institute.
The positive ZEW report is released amid a resurfacing of the euro zone sovereign debt crisis as yields on the Spanish 10-year bond touched back above 6 percent on Monday.
It seems to show that Germany, with its competitive industries, low unemployment rate and safe-haven status within the euro zone, remains somewhat insulated from the financial chaos of its indebted neighbors. The central European country may even rebound from its fourth quarter 2011 contraction and avoid a technical recession, defined as two consecutive quarters of economic decline, in 2012.
But the small increase of the ZEW indicator, as opposed to a bigger rise, also signals that economic optimism suffers from considerable risks such as the economic slowdown of important trading partners, the rise of prices for crude materials and the sovereign debt crisis in the euro zone, said ZEW President Wolfgang Franz.
Carsten Brzeski, senior economist at ING Group, echoed this sentiment.
Today's ZEW index is good news but maybe too good to be true. It should be taken with a pinch of salt, he said, according to Agence France Presse.