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‘Green Shoots’ of German Recovery Seen as ZEW Index Turns Positive By Investing.com

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Investing.com — The worst may be over for the German economy.

A closely-watched measure of confidence turned positive for the first time in 11 months in April, suggesting that the euro zone’s most important economy may be regaining momentum after nearly tipping into recession around the turn of the year.

The economic sentiment index compiled by the Mannheim-based think-tank rose to 3.1 from -3.6 in March, a stronger rise than forecast by economists and the first time in 13 months that the index has been above zero.

“After a long series of downward revisions of German growth prospects, it could be time for first (tentative) upward revisions,” said ING economist Carsten Brzeski, pointing to the ZEW’s (not always reliable) function as an indicator of turning points for the economy. He said that the drop in the euro’s trade-weighted exchange rate and the more accommodative stance taken recently by the European Central Bank had helped to improve sentiment.

There was also better news on a Europe-wide front, as the EU’s statistics agency Eurostat reported that construction activity in both the euro zone and the EU overall rose at its fastest rate since 2011 in February. Construction, like retail, is one of the more domestic-focused sectors of the economy that has helped keep activity ticking over in recent months as the export-sensitive manufacturing sector has suffered from the fallout of trade tensions between the U.S. and China.

“It may be that some of the super gloomy (euro zone) forecasts for Q1 may need to be revised,” Angel Talavera, a European economist with Oxford Economics, said via Twitter.

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ING’s Brzeski warned against giving the all-clear too soon, however.

“While the current situation in the industry is not as disastrous as some data points suggest, as order books are still filled, the risk of a negative sentiment loop or a cycle of fear has clearly increased.”