German Economy Minister Roesler Unveils Economic Data
German Economy Minister Roesler Unveils Economic Data Reuters

Early Wednesday morning, the German Ministry of the Economy cut its forecast for that country's economic growth to near-recessionary levels. The market could not care less: a benchmark index for the local stock market was up, a sale of the government's sovereign debt was reported as drawing record demand, and another report showed investors were growing more optimistic on German equities.

Those developments came as a result of a market apparently estimating the expectedly low growth in the German economy is still a surer bet than the economic contraction other countries in the Eurozone could conceivably experience in 2012.

In the land of economic contraction, it seems, even the most abysmal of growth forecasts is king.

Earlier Wednesday, German Economy Minister Philipp Roesler said his government saw the national economy growing at a rate near 0.7 percent for the year -- a reduction over previous forecasts of 1 percent growth. Before the Eurozone sovereign debt crisis intensified in October, the forecast had stood at 1.8 percent.

The German economy, a powerhouse of the European Union, is believed to have shrunk by 0.3 percent in the just-ended 2011 fourth quarter.

During the press conference announcing the growth expectations, Roesler said he viewed growth of 0.1 percent in the current quarter -- something that would prevent Germany from seeing contraction in two consecutive quarters, the technical definition of a recession.

"A temporary dent in growth can be expected for the coming months," Roesler was cited by the Associated Press as saying, adding "the economy will gradually liven up over the course of 2012."

Most of the growth will come from a spike in domestic consumption. Export growth is expected to plummet to 2 percent this year, from 8.2 percent in 2011.

Markets Shrug Off Report

While the lowered government guidance on the state of the economy made headlines, the equity and debt markets seemingly shrugged the news off. The benchmark DAX Index of blue-chip companies trading on the Frankfurt Stock Exchange was in positive territory for most of the day, closing at 6,354.57, up 0.34 percent.

An auction of the government's two-year bonds allowed Germany to sell €3.44 billion in debt at an average yield of 0.17, percent, a new record-low. The bid-to-cover ratio, a metric that measures how strong demand for the bonds were, was 2.2, an elevated figure.

AAA-rated German bunds, as the government debt is known, are considered a safe-haven investment in an otherwise troubled European sovereign debt market. Last week, Germany was one of the few countries not to be down-graded by ratings agency Standard and Poor's, which lowered the credit rating on formerly AAA-graded France and Austria.

Investor enthusiasm in the country was also evident in a report by a report on investor sentiment released by closely-watched economic think-tank ZEW.

That index rose to negative 21.6 points, from negative 53.8 points in December, a record month-to-month jump.

While still negative, and below historical averages of between 20 and 30 points, that reading was a six-month high.

"Contrary to repeatedly expressed fears of a recession, the assessment of the financial market experts gives reason for cautious optimism that Germany will only experience a dent in economic activity," ZEW President Wolfgang Franz said in a statement.