German investor sentiment improves in August as recovery hopes rise

BERLIN (Reuters) - Investor sentiment in Germany picked up more than expected in August, a ZEW survey showed on Tuesday, reflecting hopes that Europe’s biggest economy is on the road to recovery after the devastation caused by the coronavirus pandemic.

The ZEW survey of investors’ economic sentiment rose to 71.5 from 59.3 points the previous month, far exceeding a forecast for 58.0 in a Reuters poll of economists.

“Hopes for a speedy economic recovery have continued to grow,” said ZEW President Achim Wambach.

Experts were much more downbeat about current conditions, however. The index tracking those dropped to -81.3 points from -80.9 the previous month. That compared with a Reuters consensus forecast of -68.8 points.

The German economy shrank by 10.1% in the second quarter, its steepest rate on record as consumer spending, company investment and exports collapsed at the peak of the COVID-19 pandemic, wiping out nearly 10 years of growth.

Wambach said assessments from individual sectors showed that experts expect a general recovery, especially in domestic sectors. “However, the still very poor earnings expectations for the banking sector and insurers regarding the coming six months give cause for concern,” he added.

The government hopes its more than 130 billion euro ($153.17 billion) stimulus package will help a return to growth. It expects the economy to shrink by 6.3% this year and expand 5.2% in 2021.

“Signs of a strong economic recovery in the summer are continuing,” said LBBW economist Uwe Burkert. “However, the danger of an expectation bubble, triggered by massive fiscal and monetary policy impulses, which mainly boost financial markets, is not off the table,” he added.

($1 = 0.8488 euros)

Additional reporting by Rene Wagner and Klaus Lauer; Reporting by Madeline Chambers; Editing by Michelle Martin