Survey: Economic Confidence Rises In Germany

BERLIN (AP) -- Economic confidence in Germany, Europe's largest economy, improved for an eighth straight month in June, with a recovery from recession expected to come around the end of the year, a closely watched survey showed Tuesday.

The Mannheim-based Center for European Economic Research, known by its German initials ZEW, said its economic sentiment indicator rose by 13.7 points in June, to 44.8 points from 31.1 the previous month.

The agency said the ongoing recovery of its indicator reveals a "consolidating optimism among the financial market experts, even though the industrial production and incoming orders do not yet show a clear upward trend."

The forward-looking survey polled 271 analysts and institutional investors between June 2 and June 15 about their expectations of economic activity in Germany over the next six months.

Germany went into a recession in last year's third quarter.

Last week, the German Institute for Economic Research, or DIW, revised its forecast for German economic output, saying it would drop 7 percent in the second quarter -- worse than previously predicted.

The government has said it expects a contraction for the year of 6 percent, while the central bank, the Bundesbank, has predicted the economy will contract by 6.2 percent.

Still, the ZEW said their survey shows that businesses are now optimistic about the future.

"The assessment of the experts indicates that the economic downturn dynamics are currently coming to rest," said ZEW president Wolfgang Franz.

"They further see tendencies for a recovery at the end of this year. This cautious optimism should not be destroyed by overly pessimistic projections."

Economic expectations for the 16-nations using the euro currency increased in June by 14.2 points over the previous month to 42.7 in total.

Though the German growth was stronger than expected, Unicredit analyst Alexander Koch sounded a note of caution, saying the assessment of the experts appears to be "biased by developments in the financial sector" instead of more broad-based improvements, and that the index "tends to support excessive swings in the current environment."

"Although we do not doubt the signal of a trend reversal in GDP performance for the second half of 2009, we maintain our view that business expectations currently are a better gauge of what lies ahead for the German economy in terms of the extent of a recovery," he said in a research note.

He cited last month's Ifo Institute survey of current conditions, which showed businesses still mired in recession.

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