A leading confidence index in Germany published today rose unexpectedly sharply this month, as favourable Christmas business boosted retail confidence and oil prices and the euro stabilised.
The ZEW economic research institute's economic expectations index, based on a poll of 305 analysts and institutional investors, rose by 12.5 points to plus 26.9 points in January, after already rising modestly the preceding month.
The size of the increase was unexpected - analysts had been pencilling in a more modest rise to around 19 points in the January index.
'A major factor for the increased confidence among financial analysts is the optimism in the retail sector following the favourable Christmas season,' ZEW President Wolfgang Franz said. 'The year has begun well. There is justified hope that consumption and investment will move on an upward path this year,' he added.
'Contrary to some fears, the euro exchange rate and the oil price have not continued to rise and that has helped boost general optimism,' Franz continued.
The ZEW indicator represents the balance between positive and negative expectations for the economy over the next six months.
If the majority of analysts and institutional investors polled believe the economy will improve, the index shows a plus. If most are expecting a deterioriation, the index shows a minus.
ZEW also polls analysts and insitutional investors about their assessments of the current situation. The so-called 'current situation index' also showed an improvement, with a reading of minus -61.2 points in January compared with -64.2 points in December.
