German economy pulls away from European pack

Tue Feb 14, 2012 11:18am EST
 
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By Sarah Marsh

BERLIN (Reuters) - German analyst and investor sentiment leapt to its highest level in 10 months in February, reinforcing signs that Europe's largest economy is returning to growth as the rest of the euro zone faces a mild recession.

The ZEW think tank's monthly poll of economic sentiment jumped for the third month in a row, to its highest level since April 2011, smashing expectations and sending the euro to a session high against the dollar.

This contrasted starkly with other European data showing output at factories in the euro zone tumbled in December and Portugal's recession deepened in the last quarter of 2011.

A Reuters poll showed the euro zone economy shrinking 0.4 percent in 2012, returning to growth in 2013 with a 1.0 percent expansion.

But Germany may be the trailblazer.

"Germany is leaving the winter slump earlier than rest of euro zone," said Christian Schulz of Berenberg Bank. "Germany fundamentally has a high level of competitiveness."

"The economy only contracted because euro zone crisis derailed whole European continent and beyond."

Mannheim-based ZEW said its sentiment index rose to 5.4 from -21.6 in January. This was the first time the index turned positive since May, and compared with a consensus forecast in a Reuters poll of analysts for a gain to -12.0.   Continued...