Tuesday May 19, 11:34 AM
German confidence index posts further gain
BERLIN (AFP) - Hopes rose on Tuesday that the worst could be over for Europe's largest economy as the closely-watched ZEW German confidence index posted its seventh straight monthly gain in May.
The index, which measures the confidence of players in the financial markets, rose 18.1 points from April to 31.1 points in May -- its highest reading since June 2006.
Less positive, however, was a separate indicator showing that investors' assessment of the current economic climate in Germany had dipped slightly and remained at a very low level.
The head of the ZEW institute said the data suggested the German economy has reached its lowest point but warned that more jobs would be lost -- a political headache for Chancellor Angela Merkel nearly four months before an election.
"With regard merely to the economic activity, more and more signs indicate that the worst seems to be over. However, with regard to the labour market development the worst still seems to come," ZEW president Wolfgang Franz said in a statement.
Although Germany's economy contracted by 3.8 percent in the first three months of the year -- the worst reading since records began -- other signs of a tentative recovery have begun to emerge.
Both industrial orders and exports showed their first increases in March after falling for several consecutive months.
Another key survey of business confidence from the IFO institute also posted a decent rise in April, albeit from record lows, suggesting growth could begin to take hold again in the second half of the year.
While the German government expects a record dip in output this year of six percent, it believes the economy will scramble back into positive territory in 2010, predicting growth of 0.5 percent.
"We've probably just about reached the low point," Chancellor Angela Merkel said on Sunday.
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