* ZEW investor sentiment at highest level since April 2010
* Optimism about euro crisis, low interest rates behind rise
* Current conditions index dips, car sales slump
* Private consumption to rise again this year - GfK
By Victoria Bryan and Sakari Suoninen
MANNHEIM, Germany, Feb 19 Optimism that the
worst of the euro zone debt crisis is over has helped German
investor and analyst sentiment soar to its highest level in
nearly three years this month.
In the latest sign that Europe's largest economy is bouncing
back after a dismal end to 2012, the Mannheim-based ZEW think
tank said on Tuesday its monthly poll of economic sentiment rose
to 48.2 points in February from 31.5 in January.
It was above the highest forecast in a Reuters poll and much
higher than the consensus for 35.0 points.
The news, along with other recent data suggesting the German
economy will avoid recession, will come as a relief to the
centre-right government of Chancellor Angela Merkel, who is
campaigning to win a third term in a September election.
"Financial market experts have made their peace with the
weak fourth quarter of 2012," said ZEW president Wolfgang Franz.
"In their opinion the German economy faces less headwinds from
the euro crisis than throughout the last months."
The better-than-expected reading, which a ZEW economist said
was also fuelled by low interest rates, boosted the euro and
European shares and sent German Bund futures lower, although
particularly on the bond market the move was short-lived.
Germany's economy held up strongly during the first 2-1/2
years of the euro zone debt crisis but sputtered in the second
half of 2012 as firms postponed investment and exports suffered
due to a gloomy economic outlook in Europe and elsewhere.
Economists expect a moderate return to growth in the first
quarter of the year after a 0.6 percent contraction, but there
is little hard data to support hopes that Europe's powerhouse
economy will rebound quite as strongly as recent sentiment
"This (rise) is still driven by the good mood on financial
markets," said Alexander Koch of Unicredit. "But it's no bad
supporting factor for the economy when financial markets don't
go down the drain."
As euro zone peers suffered under their debt and the
currency bloc fell into recession, German exports - usually the
backbone of the economy - proved a drag on growth late last year
and private consumption is becoming more important.
Market research institute GfK, which also publishes a
monthly consumer sentiment indicator, said on Tuesday that
private consumption would grow by 1 percent after inflation this
year after 0.8 percent growth last year.
"Private consumption is making a stable contribution to the
domestic economy," GfK chief Matthias Hartmann told a news
conference in Nuremberg. "Given low interest rates and concerns
about the future of the euro, purchases of durable goods are the
trend for consumers."
Even as ZEW said the euro zone crisis had lost much of its
horror, some risks remain to the outlook and German growth would
likely not be dramatic, economists said.
Uncertainty has grown about a corruption affair in Spain and
the political future of euro zone member Italy could still
unsettle the currency bloc.
"If (Silvio) Berlusconi wins the election, the (reform) path
could be in danger. Doubts about Italy's solidity could have
serious consequences for the euro," said Norbert Barthle, budget
expert for the Christian Democrats.
Investor sentiment on the current state of the German
economy has yet to pick up. In February, it worsened to 5.2 from
7.1 in January, and some economists cautioned that ZEW was
better at predicting turning points rather than the pace of
"The ZEW provides ome further evidence that Germany is
likely to see a little V-shaped rebound in Q1 after the sharp
GDP contraction at the end of 2012," said Christian Schulz at
Markets will now turn their attention to business sentiment
figures from the Munich-based Ifo institute and purchasing
managers data, both due later this week, for confirmation of the
Hopes for a German - and a broader euro zone - economic
upturn have yet to feed through to the real economy, however.
German newspaper Handelsblatt, citing union sources,
reported on Tuesday that economic bellwether Siemens
may cut 7,000 jobs in Germany. At the moment Siemens employs
129,000 workers in Germany and 405,000 globally.
Data on Tuesday also showed that European car sales fell to
a new low in January, starting 2013 with an 8.5 percent decline.
Germany in particular weighed on the outlook. After resisting
much of last year's slump, Europe's biggest car market is in
sharp decline, extended by an 8.6 percent drop in January.
The ZEW index was based on a survey of 272 analysts and
investors conducted between Feb. 4 and 18.