German ZEW index of economic confidence up more than expected in Oct despite US debt standoff

FRANKFURT – A closely-watched measure of German economic optimism increased more than expected in October despite worries that the U.S. could default on some of its debts in the coming days.

The ZEW index, published Tuesday and based on a survey of investment analysts, rose to 52.8 points from 49.6 the month before. Analysts had expected a more modest rise to 51.0.

The survey underlines strengthened prospects for Germany, Europe’s biggest economy. Germany has been key to the 17-country eurozone’s recent recovery from its longest-ever recession.

Much of the near-term outlook for the world economy rests on whether President Barack Obama and Republicans in Congress can agree to raise the U.S.’s legal debt ceiling. If the ceiling is not raised, the U.S. could fail to make debt payments on time. Investors, analysts and economists say that could seriously disrupt the global financial system.

Yet markets seem to have largely assumed that an agreement will be reached, and the survey respondents were more focused on the improving economy.

“The financial market experts remain optimistic,” ZEW President Clemens Fuest said in a statement. “At present a greater impact of the debate on the debt ceiling in the USA is not visible.”

Holger Schmieding, an economist at Berenberg Bank in London, wrote in a note to investors that “despite the U.S. fiscal turmoil, the eurozone remains on track for a gradually strengthening upswing.”