German Confidence Spurts Ahead in July

A leading confidence index in Germany published on Tuesday picked up unexpected sharply this month as the fall of the euro and robust global growth helped offset concern about the effects of high oil prices. The ZEW economic research institute's economic expectations index, based on a poll of 294 analysts and institutional investors, rose by 17.5 points to plus 37.0 points in July, the highest level since September 2004, ZEW said in a statement. The increase was much better than expected: analysts had been penciling in a more modest rise in the index to around 22 points this month. "The reason for the sharp rise is the continued robustness of the global economy despite high oil prices," ZEW President Wolfgang Franz said. That and the weaker euro have led to a sharp rise in manufacturing orders in Germany, he said. "It remains to be seen whether this is a sustained upward correction to economic expectations," Franz continued. "As before, weak domestic demand remains the Achilles' heel to a lasting economic recovery. That will only change if the necessary reforms are implemented in the areas of corporate taxation, social welfare system and the labor markets." The ZEW indicator represents the balance between positive and negative expectations for the economy over the next six months. If most analysts and institutional investors polled believe the economy will improve, the index shows a plus. If most are expecting a deterioration, the index shows a minus.