FRANKFURT – A German index of economic optimism among investment professionals rose more than expected in September, underlining stronger growth prospects for Europe’s largest economy and for the euro currency union as a whole.
The ZEW rose to 49.6 points from 42.0 in August. That beat analysts’ expectations for an increase to 45.0 and keeps the index well above its long-term average of 23.8.
The index’s reading for the 17-country euro currency union rose even more strongly, to 58.6 from 44.0 in August, reflecting the end of an 18-month recession.
The head of the ZEW think-tank , Clemens Fuest, said Tuesday that “the financial market experts hold the view that the German economy is still gaining momentum.”
“The experts’ economic optimism has increased due to the improved economic outlook for the eurozone — although recently released economic data for Germany have fallen short of expectations,” Fuest said.
The eurozone is a key export market for Germany. A crisis over high levels of government debt in some countries in the currency bloc has eased in the past year as market fears of a government default have ebbed. The eurozone returned to modest growth of 0.3 per cent in the second quarter, while Germany had a more robust expansion at 0.7 per cent.
The ZEW is what economists call a leading indicator, meaning it points to where the economy may be going in the coming months. Economist Christian Schulz at Berenberg Bank in London said that the ZEW’s track record shows it is a reliable guide to whether economic activity has reached a turning point, though not as good at predicting how strong the recovery or downturn will be.
For the eurozone, evidence that it is turning a corner will help ease concerns about its debt problems. Growth helps shrink debt levels by improving government tax revenues and reducing the debt pile relative to the size of the economy.
“With the economy back to growth, chances that the eurozone can overcome potential setbacks improve, too,” Schulz said.
Mannheim-based ZEW, or Centre for European Economic Research, compiled the index based on a survey of 260 investment analysts at financial institutions in the period Sept. 2-16.