Merkel gets last minute boost in confidence data

Tim Wallace
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HOPES for strong German growth and a Eurozone recovery have surged on upbeat market confidence, according to data published yesterday.

The figures come just days before the German general election on Sunday and provide another boost for incumbent Chancellor Angela Merkel.

The forward-looking Zew indicator of economic sentiment in Germany shot up 7.6 points to 49.6 this month, more than double the long-term average of 23.8 points.

And the index for the current situation increased 12.3 points to 30.6.

“The headline index is now consistent with a rise in annual GDP growth from the second quarter’s 0.5 per cent to about 2.5 per cent,” said Capital Economics’ Ben May.

“But note that the index has not been a very reliable predictor of GDP in the past – overall, we continue to expect the German economy to expand by around 0.5 per cent this year and to grow by a below-consensus one per cent or so in 2014.”

The Eurozone Zew index also shot up, encouraging hopes that the troubled currency union really is undergoing a recovery.

Its expectations index improved from 44 to 58.6, its highest level this year – indicating a recovery.

“Downside tail risks remain, with the decision on the ECB rescue shield by Germany’s constitutional court topping the list,” said Christian Schulz from Berenberg Bank. “But with the economy back to growth, chances that the Eurozone can overcome potential setbacks improve, too. “