Production strong in Germany, but sentiment sours some

ZEW sends a mixed signal

A couple of key reports from Germany this week are sending out mixed signals.  Industrial production in September surged by 2.7% following an impressive 1.8% rise in the prior month.  Foreign demand provided much of the boost as the global economy continues to power ahead, bolstering Germany’s export-dependent economy.

However, institutional sentiment, though still has high levels, pulled back some in the latest month. The respected ZEW survey fell 4.9 points in November t0 51.9 points but remains well above the historical average of 26.9.

The Center for European Economic Research pointed out that analysts remain cautious as to how private consumption will evolve, especially due to the uncertainties that abound in the labor market.

Sentiment among analysts started in an uptrend late last year and continued to surge through much of the first part of 2009.  The initial optimism was a bit premature, in my view, but Europe’s largest economy has started on the road to recovery.