Germans leave Brexit behind as economic sentiment recovers from July lows

Jasper Jolly
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A young German supporter waves a German
Germany will hope it can record fourth-quarter growth for 2016 (Source: Getty)

Confidence in the German economy has risen to its highest point since before the UK’s Brexit vote, according to a long-running survey of business in Europe’s largest economy.

The ZEW Indicator of Economic Sentiment for Germany increased slightly in January 2017. The indicator rose by 2.8 points to reach 16.6 points, although this was less than analyst consensus.

This is its highest point since a reading of 19.2 points two days before the UK’s vote to leave the European Union.

Meanwhile the Eurozone measure also increased, although it also disappointed. The performance of Germany, Europe's economic powerhouse, is correlated to the broader measure for the bloc.

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Markets across Europe and the world shuddered in the wake of the Brexit vote, with widespread fears of a recession and the possibility of contagion spreading through financial markets.

The influential ZEW measure, which has been running since 1991, reflected these fears, with a steep drop to a two-year low negative reading of 6.8 points. It has since recovered steadily.

However, these fears proved unfounded in the short term. Eurozone growth remained steady, if slow, at 0.3 per cent, while various purchasing managers’ index surveys have found steadily expanding activity throughout Europe in the second half of 2016.

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Achim Wambach, ZEW president, said: "The slight increase of the ZEW Indicator of Economic Sentiment is mainly due the improved economic situation across European countries.

“The fairly good preliminary figures recorded for the development of the German GDP last year, as well as for the industrial production of the eurozone in November 2016, came as a surprise to many,” he added. “This improvement in expectations can thus also be seen as a leap of faith for 2017."

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