BERLIN (dpa-AFX) - German economic sentiment strengthened more than expected to its highest level in a year in February as market experts foresee interest rate reductions in the coming six months as inflation slows, survey data from the think tank ZEW revealed Tuesday.
The ZEW Indicator of Economic Sentiment rose more sharply to 19.9 in February from 15.2 in January.
This was the highest score since February 2023, when the reading was 28.1. The score also remained well above economists' forecast of 17.5.
In contrast, the assessment of the economic situation decreased significantly to the weakest since June 2020.
The corresponding index dropped to -81.7 from -77.3 a month ago. The score was forecast to fall moderately to -79.
'The German economy is in a bad place,' ZEW President Achim Wambach said..
Two-third of the survey respondents now forecast the European Central Bank to cut interest rate cuts over the coming six months amid falling inflation.
Wambach said about three-quarters of respondents expect imminent rate cuts by the US Federal Reserve.
Investor confidence in the euro area also strengthened in February. The economic confidence index gained 2.3 points to 25.0. The current situation index climbed 5.9 points to -53.4.
ING economist Carsten Brzeski said the improvement in the German economic morale shows there is still light at the end of a very long tunnel.
The economist observed that any cyclical improvement of the German economy will be too weak to offset structural weaknesses.
Today's data does little to change the base case scenario of yet another year of recession, Brzeski added.
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