Germany’s ZEW Economic Sentiment Index Climbs To Highest Mark Since April 2010; UK Inflation Inches Up

  @AmruthaGayathri on October 15 2013 6:09 AM
Germany Industry
An overview shows the open-cast lignite mine Garzweiler of German power supplier RWE near the village of Grevenbroich, west of Cologne on Oct. 8, 2013. Reuters/Ina Fassbender

Economic sentiment in Germany, as measured and published by research group, ZEW, to gauge investors’ expectations for the German economy in six months’ time, climbed 3.2 points to 52.8 in October -- its highest mark since April 2010 -- suggesting that financial markets continue to grow more optimistic about the future of the country's economy while remaining cautious about the present.

The rise in the index was better than a consensus forecast of an uptick to a reading of 51. However, the assessment of the current economic situation for Germany slightly worsened in October, with the ZEW indicator falling by 0.9 points to a reading of 29.7.

For the 17-nation euro zone, economic expectations marginally increased in October, with the ZEW indicator gaining 0.5 points to 59.1 points. But, the indicator for the current economic situation in the euro zone decreased by 1.2 points to a level of negative 60.9 points.

“October’s rise in the ZEW index suggests that Germany is so far weathering the storm of political turmoil elsewhere,” Jennifer McKeown, senior European economist at Capital Economics, said in a note. “It also beat our own expectation that the near collapse of the Italian Government earlier this month and the Government shutdown in the US might prompt a slight decline in investor optimism. The ZEW index now looks roughly consistent with a pick-up in annual GDP growth from Q2’s 0.5% towards 2.5%.”

Meanwhile, the UK’s consumer price index, or CPI, grew 2.2 percent in September on a monthly basis, compared to 2 percent in August. On a yearly basis, CPI grew 2.7 percent in September, the same as in August.

“While a fall in petrol prices exerted a downward influence on inflation, a surprise rise in airfares inflation offset this,” Samuel Tombs, UK Economist at Capital Economics, said in a note.

“But the rise in core inflation is unlikely to mark the start of an upward trend. Airfares inflation is often volatile from month to month… So despite the recently announced utility price hikes, we continue to think that CPI inflation is likely to fall back to the 2% target within the next few months and will remain low thereafter,” Tombs said.

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