German business sentiment improves in February - ZEW

German business sentiment improved in February, according to a survey released on Tuesday by the ZEW Center for European Economic Research in Mannheim.

The headline ZEW investor expectations index rose to 28.1 from 16.9 in January, coming in ahead of expectations for a reading of 22.0.

The current conditions index improved to -45.1 in February from -58.6 the month before, ahead of expectations of -50.5.

ZEW President Achim Wambach said: "As in the previous month, the increase in expectations can be traced back to higher profit expectations in the energy- and export-oriented sectors as well as the consumer-related parts of the economy.

"Expectations for long-term interest rates are also rising and the banking sector indicator has reached its highest level since 2004."

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the rebound looks real but questioned whether it will be sustained.

"EZ investor sentiment data are still turning up, consistent with continued low gas prices, and rising equity prices," he said. "These data are not always reliable indicators for conditions in the wider economy, but they are now pointing to a pick-up in economic activity and economic sentiment, primarily evidenced by the split between rising expectations and a still-depressed current conditions index. This is often an early indicator for better things to come in the EZ economy.

"On this occasion, however, it is also likely an indication that risks for ECB rate hikes are tilted to the upside, despite the consensus expectations of 75-to-100bp further hikes between now and June."