- The Washington Times - Tuesday, March 17, 2009

FRANKFURT (AP) - Germany’s economy may have reached a low point and be poised to start a recovery this summer, a key indicator of investor sentiment suggested Tuesday.

The ZEW survey, released in part by the University of Mannheim’s ZEW Institute, said that Germany’s business outlook improved in March with its indicator for economic sentiment rising by 2.3 points to minus 3.5 points from minus 5.8 points in February.

While still well below the historic average of 26.2 points, the figure has risen for the fifth consecutive month and reached the highest level since July 2007.

The narrow increase drew surprise and a sense of relief that the economic malaise that has gripped Europe’s biggest economy since last year may be set to finally improve. Germany fell into recession last year.

“According to the financial market experts, the economic slowdown is gradually phasing out,” ZEW President Wolfgang Franz said in a statement. “The bottom of the recession is likely to be reached this summer.”

Franz said the economic situation in Germany remained “extremely bad, but there are first signs of hope. They should not be played down.”

In its monthly report, ZEW said the rise in the economic indicator suggested experts were more optimistic about the prospects for the domestic economy over the next six months. It said that was partly due to the European Central Bank’s decision to cut interest rates to 1.5 percent as well as lower commodity costs.

The ECB, central bank to the 16 countries that use the euro, lowered is benchmark rate by a half percentage point earlier this month in an effort to get banks lending and businesses borrowing, something that would encourage more economic growth.

The ZEW said the assessment of the current economic situation in Germany also stabilized in March. That indicator dropped slightly, by 3.2 points to minus 89.4 points.

For the entire euro zone, the ZEW said that economic expectations improved in March by 2.2 points to minus 6.5 points. The current euro zone economic situation indicator rose by 0.3 points to minus 90.7 points.

Besides being Europe’s biggest economy, Germany is also the world’s largest exporter. If its orders for its machinery and cars start to pick up again, that will bode well for the country’s neighbors as well, as more goods, parts, components and money start to flow over borders. France, for instance is Germany’s biggest trading partner.

“The ZEW, which reflects economists’ and asset managers’ growth expectations in six months time rose surprisingly from minus 5.8 to minus 3.5,” beating estimates,

UniCredit Economist Andreas Rees said in a note to clients that the rise in the ZEW’s expectations indicator beat estimates, but also warned it was still too early to tell whether the recession would be over this summer, as the ZEW suggests.

“Yes, an end of the recession in (the second half of) 2009 is possible. But no, this scenario is still not a done deal, but hanging in the balance,” Rees said.


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