March's modest rise in the ZEW German investor sentiment index suggests that hopes for the German economy have been tempered by worries about the impact of the Greek crisis.
The rise in the headline expectations index, from 53.0 to 54.9, was very small by past standards and failed to match the consensus forecast of an increase to 59.4.
Capital Economics notes in a report on Tuesday:
- Admittedly, the index remains at a high level, with a significant majority of investors still expecting economic conditions to improve in the next six months. Very roughly speaking it points to an increase in annual German GDP growth from Q4's 1.5% to just over 2%.
- Note that the ZEW current conditions index also rose in March, to an eight-month high of 55.1. This adds to signs that the economic recovery should continue in the near term at least, no doubt supported by the euro's depreciation.
- However, the slightly disappointing outturn is a reminder not to expect too much from the German recovery at a time when other parts of the single currency area are under such strain and the future composition of the union remains in question. We still see German GDP rising by about 1.5% this year and next.
