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German Investor Confidence Steadies

The steady numbers, after four months of declines, 'indicate that the most pressing downward corrections following the crisis on the financial markets seem to have come to an end.'

BERLIN (AP) — German investor confidence stabilized in October after falling for four consecutive months as markets reeled from the U.S. subprime mortgage crisis, a closely watched survey showed Tuesday.
The ZEW institute's monthly index, which measures investors' economic expectations for Europe's biggest economy during the next six months, was unchanged at -18.1 points for October.
The steady figures ''indicate that the most pressing downward corrections following the crisis on the financial markets seem to have come to an end,'' ZEW said in a statement.
Economists surveyed by Dow Jones Newswires had forecast another drop, to -23.5.
In a separate report Tuesday, the German Institute for Economic Research trimmed its forecast for German economic growth this year to 2.4 percent from a July forecast of 2.6 percent. For 2008, it lowered its outlook to 2.1 percent from 2.5 percent.
The 2007 forecast remains above the German government's prediction of 2.3 percent growth this year.
In the ZEW report, investors' assessment of Germany's current economic situation worsened in October, with a subindex measuring that dropping by 4.2 points to 70.2.
''The greatest risk factor for the development of the German economy in the following six months are the exports, which are expected to decrease owing to the strong euro and the decreasing rate of growth of the U.S. economy,'' it said.
ZEW added that discussions among German politicians over whether cuts to unemployment benefits should be softened also ''might impair expectations.''
The euro reached an all-time high of $1.4282 on Oct. 1, and has remained close to that level. The strength of the euro risks making European exports less competitive.
''The modest improvement in money and credit markets and the resilience of U.S. data apparently offset concerns about the rising euro in October,'' Holger Schmieding, Bank of America's chief European economist, said in a research note.
The stable ZEW reading, together with a decline in euro-zone core inflation to 1.8 percent,'' are the first signs that the 'not too hot, not too cold' scenario of above-trend growth at subdued inflation may well return next spring,'' Schmieding said.
Helped in particular by strong exports, Germany has been emerging over the past two years from a lengthy period of stagnation that pushed up unemployment and prompted Germans to tighten their purse strings.
Recently, however, several indicators for the nation's economy have been sliding — alongside the ZEW survey, the less-volatile Ifo index of business confidence and a monthly consumer confidence poll.
''Given the latest flat reading, there is obviously a tug-of-war between optimists and pessimists,'' said economist Andreas Rees at UniCredit in Munich. ''In the end, both camps 'neutralized' each other.''
ZEW's index was based on a survey of 278 analysts and institutional investors.
In its report on Tuesday, the German Institute for Economic Research said recent financial market volatility is unlikely to have an impact on the economy.
''While companies' investments are increasing particularly strongly this year, private consumption demand will become the driving force for further expansion in the following years,'' said Stefan Kooths, an expert at the institute.
The research organization highlighted a shortage of qualified workers as a potential obstacle to future growth. Germany already is moving to ease access for skilled workers from the European Union's new eastern members, however.
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