German Investor Confidence Rises to Three-Year High (Update1)

Sept. 15 (Bloomberg) -- German investor confidence rose to the highest level in more than three years in September after the economic recovery gathered strength and stocks surged.

The ZEW Center for European Economic Research said its index of investor and analyst expectations, which aims to predict developments six months ahead, increased to 57.7 from 56.1 in August. Economists predicted the index would rise to 60, the median of 39 forecasts in a Bloomberg News survey showed.

Improving factory orders, exports and business confidence suggest growth is accelerating after Germany unexpectedly exited its worst recession since World War II in the second quarter. The benchmark DAX index has rebounded 52 percent from its March trough and reached the highest level in almost a year last week as companies worldwide from Goldman Sachs Group Inc to Bayer AG posted better-than-projected earnings.

The ZEW’s gain “may be less than expected, but it’s still good news,” said Klaus Baader, chief European economist at Societe Generale in London. “It does however show that the pace of the upswing can’t be maintained. Next year is going to be more difficult with unemployment rising and government stimulus petering out.”

ZEW’s gauge of the current economic situation rose to minus 74, less than economists had forecast, from minus 77.2 in August. The euro fell about a fifth of a cent after the report was published, to $1.4590 at 11:30 a.m. in Frankfurt.

Deep Recession

The Economy Ministry has indicated its forecast for a 6 percent economic contraction this year may be too pessimistic.

Improving global trade is boosting demand for exports while the government’s 95 billion-euro ($138 billion) stimulus package is spurring spending at home. The package includes infrastructure investment and a 2,500-euro payment for people who trade in their old car and buy a new one.

Bayer, Germany’s largest drug maker and a supplier of plastics to the car industry, on July 29 posted net income of 532 million euros, beating the 393.1 million euros forecast by analysts in a Bloomberg survey.

Economic growth may slow as stimulus packages expire and rising unemployment damps consumer spending. The 5 billion-euro “cash-for-clunkers” fund, which boosted new vehicle registrations by 22.8 percent in the first five months of the year, ran dry earlier this month.