German Investor Sentiment Gains as Economy Faces Bumper Year

(Bloomberg) -- German investor confidence rose to an eight-month high in January, setting an optimistic tone for Europe’s largest economy in 2018.

The ZEW Center for European Economic Research in Mannheim said on Tuesday that its index of investor expectations increased to 20.4 from 17.4 in December. Economists in a Bloomberg survey predicted a gain to 17.7.

German Investor Sentiment Gains as Economy Faces Bumper Year

Germany’s economy has been enjoying a strong run, supported by domestic spending and solid global trade, and saw the strongest expansion since 2011 last year. The Bundesbank says the momentum is likely to continue, and the country’s benchmark stock index has rallied in recent weeks to reach an all-time high. Companies in the manufacturing sector are seeing particular strength, as activity rose to a record level last month.

“The latest survey results reveal an optimistic outlook for the German economy in the first six months of 2018,” ZEW President Achim Wambach said in a statement, adding that private consumption is likely to be a key driver of growth. The assessment of the economic environment in Europe and the U.S. “is also much more favorable than it was at the end of 2017.”

The euro traded at $1.2250 at 11:21 a.m. Frankfurt time. While that’s down 0.1 percent on the day, the single currency has appreciated around 4 percent since mid-December.

Some European Central Bank officials have expressed concern that the gains may weigh on inflation, which remains well below 2 percent. Others have pushed for an unwinding of unprecedented stimulus. The Governing Council is set to meet for its first policy update of 2018 on Thursday.

While economists expect officials to hold off on any major changes, according to estimates in a Bloomberg survey, this year could see quantitative easing being phased out by the end of the year if momentum remains strong.

ZEW’s measure for expectations in the euro area increased to 31.8 from 29. A gauge for current conditions in Germany gained in January to 95.2 from 89.3, reaching the highest level since the survey started in 1991.

©2018 Bloomberg L.P.