German analyst and investor sentiment beat expectations and rose to its highest level in four years in November, helped by a slightly improved economic outlook for the eurozone as a whole, a survey showed on Tuesday.
A monthly survey by the Mannheim-based ZEW economic think tank's put economic sentiment up at 54.6 in November, its highest level since October 2009, from 52.8 the previous month.
The strong reading reflects a growing sense among economists that the outlook for Europe's biggest economy is solid, although German economic growth did slow in the third quarter and the survey's current conditions index fell and was below forecasts.
"Economic expectations for Germany have been hovering at a high level for months," said ZEW President Clemens Fuest. "The slightly improved economic outlook for the eurozone might have contributed to this development."
Faith in a broader pickup in European economies hammered by five years of financial stress and budget cutbacks remains thin.
The European Central Bank surprised most analysts by cutting interest rates at the start of this month as inflation slid far below its 2 percent target and while Germany looks in better shape than most, its expansion slowed to 0.3 percent in the third quarter from 0.7 percent in the second.
ZEW economist Michael Schroeder said the deterioration in the current situation indicator was due in part to the ECB's rate cut on Nov. 7, which was seen by investors as a sign of problems in the economy.
"The expectations for the banking sector deteriorated significantly after the rate cut because it has been interpreted as a signal of the fragility of the financial sector which hasn't been seen as such before," said Schroeder.
Still, ING economist Carsten Brzeski said that as peripheral eurozone countries stabilize further and China rebalance its growth model, Germany's much-criticized export sector will probably flourish again.
"The German economy continues to benefit from low interest rates, the strong labor market, solid domestic demand and the improved outlook for external demand," he said.
"As a consequence, the German economy should cruise along rather smoothly to the end of the year."
The Bundesbank said on Monday Germany was growing solidly and its upturn would likely be consolidated in coming months helped by domestic demand and an improved global environment.
The OECD earlier lowered its forecast for next year to 1.7 percent from its previous estimate of 1.9 percent.
The ZEW index was based on a survey of 265 analysts and investors conducted between Nov. 4 and Nov. 18, ZEW said.
The Reuters consensus in a poll of 38 economists had been for the index to rise to 54.0, with forecasts ranging from 48.0 to 57.8.
© 2023 Thomson/Reuters. All rights reserved.