German investor sentiment rebounds

GERMAN INVESTOR confidence has made a surprise rebound, suggesting calm is returning to financial markets after weeks of chaos.

The closely-watched Zew index rose more than 10 points to minus 53.5 yesterday from last month's level, surprising analysts who expected little if no improvement.

"The experts seem hopeful that the collective actions of governments and central banks will mitigate the economic slowdown," said Wolfgang Franz, head of the Centre for European Research (Zew), which prepares the survey.

The survey was conducted from October 27th to November 10th, during which time the cabinet in Berlin agreed an economic stimulus package.

The two-year programme includes tax breaks for new car buyers and greater financial assistance in improving the energy efficiency of buildings.

Though better than expected, and the end of a year-long downward spiral, analysts say the Zew survey results nevertheless reflect relatively weak sentiment, with far more investors expecting the situation to darken than brighten in the coming months. "The index is still at clearly recession levels, with no sign of bottoming out," said Alexander Koch of Unicredit. "There is no doubt about it: the German economy is sliding into a recession."

All eyes today will be on the country's "five wise men", the economic advisers to the federal government who will release their updated growth forecasts for Europe's largest economy.

They are expected to forecast no economic growth at all in 2009.

Tomorrow, meanwhile, the government will publish its own figures, expected to show that Germany is officially in recession.

The gloom is reflected in almost all important indicators: German business confidence dropped to a five-year low last month while industrial production experienced its greatest fall in September for 14 years.