German Economic Sentiment Falls Less Than Forecast

Germany's economic confidence declined less-than-expected in January, survey results from the Mannheim-based think tank ZEW showed Tuesday.

The ZEW Indicator of Economic Sentiment dropped to 17.8 points in February from 20.4 in January. Though the score was above the expected level of 16.0, it was below the long-term average of 23.7.

The current conditions index fell to 92.3 from 95.2 in the previous month, but it was the second highest reading on record. The score was forecast to fall moderately to 94.

February's small fall in German investor sentiment was unsurprising against a backdrop of falling equity prices and a strong euro, Jennifer McKeown, an economist at Capital Economics, noted.

The fact that the majority of investors expect economic conditions to improve regardless is testament to the positive outlook for the broader economy, the economist said.

"The latest survey results continue to show a positive outlook for the German economy," ZEW President Achim Wambach said. 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, he added.

Wambach noted that economic growth in Germany is substantially driven by global economy and private consumption. Inflation expectations for Germany and the Eurozone have also started to increase, he said.

About two thirds of the survey participants expect the inflation rate in Germany and the entire euro area to increase in the next six months.

The economic sentiment index for the euro area dropped 2.5 points to 29.3 in February. Meanwhile, the current conditions indicator rose 1.3 points to 57.7.