German analyst and investor sentiment beat expectations and rose to its highest level in four years in November, helped by a slightly improved economic outlook for the euro zone as a whole, a survey showed on Tuesday. A monthly survey by the Mannheim-based ZEW economic think tank's put economic sentiment up at 54.6 in November, its highest level since October 2009, from 52.8 the previous month.
The strong reading reflects a growing sense among economists that the outlook for Europe's biggest economy is solid, although German economic growth did slow in the third quarter and the survey's current conditions index fell and was below forecasts. "Economic expectations for Germany have been hovering at a high level for months," said ZEW President Clemens Fuest. "The slightly improved economic outlook for the euro zone might have contributed to this development."
Faith in a broader pickup in European economies hammered by five years of financial stress and budget cutbacks remains thin. The European Central Bank surprised most analysts by cutting interest rates at the start of this month as inflation slid far below its 2 percent target and while Germany looks in better shape than most, its expansion slowed to 0.3 percent in the third quarter from 0.7 percent in the second.
ZEW economist Michael Schroeder said the deterioration in the current situation indicator was due in part to the ECB's rate cut on November 7, which was seen by investors as a sign of problems in the economy. "The expectations for the banking sector deteriorated significantly after the rate cut because it has been interpreted as a signal of the fragility of the financial sector which hasn't been seen as such before," said Schroeder.
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