German investor sentiment deteriorates less than expected in February - ZEW

German investor sentiment deteriorated less than expected in February, according to the latest survey from the ZEW Center for European Economic Research in Mannheim.

The indicator of economic sentiment fell to 17.8 from 20.4 in January, exceeding expectations of a bigger drop to 16.0.

Meanwhile, the current situation index declined to 92.3 this month from 95.2 in January, missing expectations for a reading of 93.9.

Professor Achim Wambach, President of ZEW, said: "The latest survey results continue to show a positive outlook for the German economy. The assessment of the current economic situation is still on a very high level and the economy is expected to improve in the coming six months.

"Economic growth in Germany is substantially driven by the very good development of both the global economy and private consumption. Inflation expectations for Germany and the eurozone have also started to increase."

Jennifer McKeown, chief European economist at Capital Economics, said the small fall in sentiment reflects the drop in equity prices rather broader concerns about the economy, and noted that investors still expect economic conditions to improve.

"Investors do not seem to think that the falls have seriously affected the outlook for the German economy over the next six months. Indeed, the fact that the ESI is firmly in positive territory means that the majority still see conditions improving. The current conditions index fell slightly too, but from a very high level, and it has tended to lag developments in the hard data in the past.

"With equity prices still higher than a year ago, their recent declines seem unlikely to do too much damage. And while the euro’s strength and the slowdown in China are more worrying for Germany’s prospects, for now export orders are very strong. Meanwhile, the likely formation of a Grand Coalition Government should mean some fiscal support for households over the next couple of years, which, combined with a moderate pick-up in wage growth, should boost household spending. We still expect the Germany economy to expand by an above-consensus 2.7% this year and 2.0% next."