German June Investor Confidence May Rise to Three-Year High
German investor confidence probably increased to a three-year high in June after evidence emerged that the recession in Europe’s largest economy is bottoming out, a survey of economists shows.
The ZEW Center for European Economic Research will say its index of investor and analyst expectations rose to 35 from 31.1 in May, according to the median of 35 forecasts in a Bloomberg News survey. That would be the highest reading since June 2006. ZEW releases the report, which aims to predict economic developments six months ahead, at 11 a.m. in Mannheim today.
There are signs Germany’s worst economic slump since World War II is easing. The pace of contraction in the country’s manufacturing sector is slowing and the benchmark DAX Index has gained 35 percent since touching a five-year low three months ago. Still, the government predicts the economy will contract 6 percent this year.
“The market is relatively optimistic with the first green shoots emerging,” said Joerg Angele, an economist at Bayerische Landesbank in Munich. “While the economic free-fall may be over, we’re still far from a sustained recovery.”
ZEW’s gauge of the current economic situation probably rose to minus 92.6 from minus 92.8 in May, according to the Bloomberg survey.
Stimulus Measures
Chancellor Angela Merkel’s government has pledged to spend about 85 billion euros ($117 billion) in an effort to rekindle growth, including tax breaks and a 2,500-euro payment for consumers who scrap their old car and buy a new one.
The European Central Bank this month held its key interest rate at a record low of 1 percent and said it will start purchasing 60 billion euros of covered bonds in July to help revive lending bad credit cash loans.
“Monetary and fiscal stimulus could help the economy to find its feet in the summer months of 2009,” the Bundesbank said on June 5. “Despite a mild recovery in the course of the year, the outlook for 2010 remains for a low level of economic activity.”
Unemployment may rise to 10.5 percent next year from 8.2 percent currently, the Bundesbank said.
Continental AG, Europe’s second-largest car-parts maker, said on June 5 it may eliminate as many as 2,600 of its 27,000 German jobs by the end of 2010 to counter a drop in demand. The Hanover-based company cut 6,000 jobs in the first quarter.
Volkswagen AG, Europe’s largest automaker, said on June 12 that “very weak” global car markets aren’t yet recovering, even as the company’s sales rose in May for the first time in eight months thanks to government incentives.
Deutsche Bank AG Chief Executive Officer Josef Ackermann said on June 11 he sees encouraging signs of a global economic recovery “at a modest level.” Still, “we’re not out of the woods,” he said.
Commercial banks in the 16-nation euro region may lose a further $283 billion by the end of next year as the financial crisis forces them to write off bad loans, the European Central Bank said yesterday.