German analyst and investor sentiment rose more than expected in October on signs that the recession in the euro zone was bottoming out, a survey showed today.
The survey highlighted a brightening outlook for Europe's largest economy.
The Mannheim-based ZEW economic think tank's monthly poll of economic sentiment rose to 52.8 in October from 49.6 in the previous month, its highest level since April 2010.
The reading beat the Reuters consensus in a poll of 36 economists for the index to remain unchanged.
"For Germany, it's relatively good news regarding the business cycle," said ZEW economist Marcus Kappler. "Early indicators at the moment are positive especially for the euro zone. Recession in the euro zone is bottoming out."
ZEW said that sentiment would have risen even more were it not for a fiscal crisis in the US.
Economists said the positive ZEW data fit into the overall picture of the German economy gradually improving over the year.
It steamed ahead during the early years of the euro zone crisis before weakening last year but economic growth bounced back in the second quarter of 2013. Economists generally expect slower but solid growth in the July-September period.
Analysts noted that the situation in the US was the "big unknown" for Germany. While its exposure to US bonds was limited, a further appreciation of the euro and a sharp slowdown in the US economy would be severely damaging for German exports.
ZEW's Kappler said the dollar would likely devalue against the euro during the next month "mainly due to the budget. problem", although this might change during the next few days.
A month of combat in the US Congress over government spending showed signs last night of giving way to a Senate deal to reopen federal agencies and prevent an economically damaging default on federal debt.
The ZEW index tracking current conditions eased slightly to 29.7 in October from 30.6 in the previous month.
The index was based on a survey of 237 analysts and investors conducted between September 30 and October 14, ZEW said.