The morale of German investors has reached a 6-month high in hopes that COVID will ease. Written by Reuters

Klaus Lauer and Paul Carrel

BERLIN (Reuters) – German investors’ sentiment reached its highest level in six months in January due to expectations that the incidence of COVID-19 cases will fall by early summer, allowing growth in Europe’s largest economy to pick up in the next six months. .

The ZEW Economic Research Institute said on Tuesday that its economic sentiment index rose to 51.7 from 29.9 points in December. A Reuters poll showed an increase to 32.0.

“The economic outlook has improved significantly with the start of the new year. Most financial market experts predict that economic growth will increase in the next six months,” ZEW President Achim Wambach said in a statement.

“It is likely that the phase of economic weakness from the fourth quarter of 2021 will soon be overcome. The main reason for this is the assumption that the incidence of COVID-19 cases will fall significantly by the beginning of summer.”

The German economy failed to return to size before the 2021 pandemic because a shortage of microchips hit manufacturing in the automotive industry, and further restrictions on COVID-19 slowed recovery in the last months of the year.

Last week, the Volkswagen (DE 🙂 Group announced its lowest annual sales in 10 years of 8.9 million deliveries, and said it expects supply chain conditions to remain volatile in the first half of this year. [nL8N2TS1OZ]

Thomas Gitzel, an economist at VP Bank, said there was reason to hope the economy would recover. “When raw materials and supplies are available again in sufficient quantities and when the infection situation recedes, the German economy will jump sharply,” he said.

However, health officials say the coronavirus remains a serious threat.

Germany has a relatively low vaccination rate compared to neighboring countries, with 47.6% of the population receiving the supplementary vaccine.

The German industry association BDI said last Thursday that it expects economic growth of 3.5 percent this year, warning that companies could face another “stop-and-go year” due to the pandemic.

The government, according to estimates released in October, projected growth of 4.1%, compared to 2.7% in 2021.

The BDI said the coronavirus variant Omicron is blurring the outlook, with Germany particularly at risk of China, its biggest trading partner, becoming paralyzed again if authorities stick to a “zero” response to COVID’s closure to an increase in cases.

The ZEW index for current conditions fell to -10.2 points from -7.4. The consensus forecast was for a reading of -8.5.