MANNHEIM: German analyst and investor sentiment rose sharply in December for a second month running, as a decline in the euro and the price of oil boosted hopes for a pickup in Europe's largest economy after it barely dodged recession in the third quarter.
Mannheim-based think tank ZEW's monthly survey of economic sentiment climbed to 34.9 in December from 11.5 in November to reach its highest level since April. It was the biggest monthly gain in nearly two years, easily beating a Reuters consensus forecast for a reading of 20.0.
"Confidence in the German economy seems to be slowly returning among the financial market experts surveyed by ZEW. This increase is related to favourable economic conditions such as the weak euro and the low crude oil price," said ZEW President Clemens Fuest.
He noted however that much of the optimism was being fuelled by factors that might prove fleeting.
A separate gauge of current conditions increased to 10.0 from 3.3 in November. The index was based on a survey of 230 analysts and investors conducted between Dec. 1 and 15.
The euro hit its weakest levels against the U.S. dollar in more than two years earlier in December. Oil has fallen to its lowest level in over five years and, at just above $59 per barrel, has nearly halved since June.
The German economy grew by just 0.1 percent in the third quarter of 2014, narrowly avoiding recession thanks to a strong rise in consumer spending and a small boost from foreign trade.
Economists expect modest improvement in the fourth quarter.
"The evidence that Germany's economy is about to reaccelerate after a rough patch is mounting," said Christian Schulz of Berenberg Bank.
A survey of purchasing managers published earlier on Tuesday gave mixed signals, showing Germany's private sector grew at the slowest pace in 18 months in December as a pickup in manufacturing activity failed to offset declining momentum in services.
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