Analysts became surprisingly more upbeat about the German economic situation this month according to ZEW's latest survey.
January's current conditions index followed December's 6.7 point advance with a rise of more than 12 points to 22.4, their highest level since September and the third increase in as many months. At the same time, expectations built on their year-end 23.4 point surge with another solid 13.5 point gain to 48.4, their strongest value since February 2014.
ZEW attributed the markedly more optimistic view to the anticipated effects of the collapse in oil prices and the competitiveness benefits of a weaker euro. It may also reflect widely held expectations that the ECB will embark on quantitative easing on Thursday. Although the correlation is hardly strong, the ZEW's findings probably make for some upside risk to Friday's flash PMI report.
The monthly survey, conducted by the Mannheim-based Center for European Economic Research (ZEW), asks German financial experts for their opinions on current economic conditions and the economic outlook for Germany as well as other major industrial economies.
The ZEW Indicator of Economic Sentiment is calculated from the results of the ZEW Financial Market Survey. The ZEW is followed closely as a precursor and predictor of the Ifo Sentiment Survey and as such is followed closely by market participants. The data are available the second week of the month for the preceding month. The survey provides a measure of analysts' view of current economic conditions as well as a gauge of expectations about the coming six months. The latter measure tends to have the larger market impact and reflects the difference between the share of analysts that are optimistic and the share of analysts that are pessimistic. About 350 financial experts take part in the survey.
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