German Investor Confidence May Rise a Fourth Month in February

By Simone Meier

Feb. 17 (Bloomberg) -- German investor confidence probably improved for a fourth month in February after the government stepped up efforts to bolster the economy and the European Central Bank signaled it will cut interest rates to a record low, a survey of economists shows.

The ZEW Center for European Economic Research will say its index of investor and analyst expectations rose to minus 25 from minus 31 in January, according to the median of 37 forecasts in a Bloomberg News survey. The index reached a record low of minus 63.9 in July. ZEW releases the report, which aims to predict economic developments six months ahead, at 11 a.m. in Mannheim.

ECB policy makers say they have room to drop borrowing costs further as the euro area battles its worst recession since World War II. Chancellor Angela Merkel’s coalition on Jan. 12 agreed to spend about 80 billion euros ($102 billion) over two years to boost the German economy, the largest in the 16-nation bloc. Germany’s benchmark DAX share index has risen 4 percent in the past three weeks.

“Analysts hope that the second half won’t be quite as bleak as the beginning of the year following central bank and government measures to counter the crisis,” said Rainer Guntermann, an economist at Dresdner Kleinwort in Frankfurt. “Still, nobody expects a marked economic improvement.”

ZEW’s gauge of current conditions will drop to minus 82 from minus 77.1, the survey of economists shows.

‘Super Difficult’

German gross domestic product slumped 2.1 percent in the fourth quarter of 2008 from the third, the biggest drop in 22 years. The economy will shrink 2.5 percent this year, according to the International Monetary Fund.

Porsche SE, the maker of the 911 sports car, said Jan. 30 that first-half sales plunged 14 percent. Volkswagen AG’s Audi luxury division expects a “super difficult” year, Chief Executive Officer Rupert Stadler said on Feb. 3.

The ECB has cut its key rate by 2.25 percentage points since early October to 2 percent, the most aggressive easing since the bank took control of monetary policy a decade ago. ECB council member Axel Weber said on Feb. 14 that the bank may “continue to use the room to maneuver on interest rates.”

Economists expect the ECB to reduce its benchmark to a record low of 1.5 percent at its next policy meeting on March 5.

Crude oil prices have dropped more than 70 percent from a July peak of $147 a barrel, damping inflation and increasing consumers’ and companies’ purchasing power.

Merkel’s stimulus program, which includes tax cuts and infrastructure investment, may also help revive the economy later this year.

Deutsche Bank AG, Germany’s largest bank, said earlier this month that revenue rose “significantly” in January from a year earlier. “With all the appropriate caution, this gives us confidence for 2009,” Chief Executive Officer Josef Ackermann said. “We are certain that Deutsche Bank will emerge from this crisis stronger.”

To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net.