- Jennifer McKeown, senior European economist at Capital Economics
Confidence among German investor unexpectedly surged to a three-year high in March, suggesting Europe's largest economy will return to growth this year. Even despite renewed worries from Italy and Cyprus, a gauge of investor and analyst expectations confidence increased to 48.5 from 48.2 in February. Analysts, however, expected the measure, which is designed to predict economic developments six months in advance, to decline to 47.9. The Bundesbank predicts German economy will expand in the current quarter after contracting 0.6% in the final three months of the previous year, and the fact that business confidence improved for a fourth month is adding to signs that the growth of German economy can even accelerate.
"The increase in the ZEW index leaves it at a high level, but there is a clear risk that ongoing developments in Cyprus and Italy prompt renewed falls soon," said Jennifer McKeown, senior European economist at Capital Economics in London. "We suspect that sentiment will weaken in the coming months."
"The main risk to an eventual recovery in domestic demand in Germany is a renewed intensification of the euro crisis," said Elga Bartsch, chief European economist at Morgan Stanley & Co. in London.
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