The ZEW German economic sentiment index surprised to the upside, rising slightly to -53.8 in December from -55.2 in November, somewhat better than the consensus (-55.8) expected.

However, the current reading remains far below the long-term average of about +25 points and continues to reflect the low expectations among the financial experts that take part in this survey for German economic activity over the next six months.

The biggest improvements in sentiment came in the construction sector where the index rose from -26.2 to -17.5. The banking and insurance sectors also saw some stabilisation at very low levels and economic sentiment rose to -71.1 and -63.8 from -75.3 and -69.8, respectively. At the same time, sentiment for the automobile, steel and mechanical engineering sectors declined further.

The ZEW's current situation index declined to 26.8 from 34.2 in November, but the gap between sentiment and the current situation remains large. The ZEW said that "the economic sentiment for Germany seems to have bottomed out. Apparently, the financial market experts expect economic activity to slow down but not to plunge during the next six months. The decisions of the latest EU summit may have improved the experts' expectations. Subject to a consensus on crucial details, these decisions are an important step towards an efficient institutional framework for the currency union."



source: BarCap