Full speed ahead? The German ZEW index increased in February to the highest level since April 2010. The ZEW index which measures investors’ confidence now stands at 48.2, from 31.5 in January; the third consecutive monthly increase. At the same time, however, investors have become somewhat more negative on the current economic situation. The current assessment component dropped to 5.2, from 7.1 in January, its lowest level since June 2010. The positive contagion in financial markets continues to comfort financial analysts.
The ZEW index has not the best track record when it comes to predicting German economic activity. In fact, since 2006, the index had a tendency to “miss” the periods of strong growth. Since mid-2011, however, the components of the ZEW and the Ifo have broadly stayed in tune. With this in mind, we could see another increase of Germany’s leading confidence indicator, the Ifo index, at the end of this week.
Without any single hard data for the year 2013, the prospects for the German economy look promising. Even if the real economy only lives up to half the expectations recently created by soft indicators, any fears of a technical recession should turn out to have been unjustified.