German economic sentiment held steady in December, as upbeat growth data from the euro area pushed the rising risks from the Italian banking crisis and European elections into the background.
The ZEW Indicator of Economic Sentiment for Germany was at 13.8 points, unchanged from November, survey results from the Mannheim-based Centre for European Economic Research/ZEW showed Tuesday.
Economists had expected a modest improvement in the measure to 14. The reading was below its long-term average of 24.0 points.
The current conditions index of the survey rose to 63.5 from 58.8. Economists had forecast a score of 58.8.
"The ZEW Indicator of Economic Sentiment remains at the same level; however, given the fact that the evaluation of the current situation has once again recorded an improvement, the overall assessment is quite positive," ZEW President Achim Wambach said.
This is supported by the recently published positive GDP growth figures for the euro area in the third quarter, Wambach said.
"The considerable economic risks arising from the tense situation in the Italian banking sector, as well as the political risks surrounding upcoming elections in Europe, seem to have faded into the background at the moment," he added.
The survey also showed that the Eurozone economic sentiment improved marginally in December with the measure adding 2.3 points to 18.1. The current situation index rose a point to minus 8.3.
"On balance, this survey and others suggest that the German economy is faring well for now," Capital Economics economist Jennifer McKeown said.
"But we doubt that recent strong rates of growth, which have owed much to the effects of falling inflation on consumer spending, will be sustained."
Capital Economics continue to expect German GDP growth to slow from about 1.7 percent this year to 1.2 percent in 2017 and the slowdown could be much sharper if political risks in Italy or France materialize, McKeown added.
Germany's economic growth is likely to pick up again in the fourth quarter after slowing in the third quarter, the Economy Ministry said Monday.
The Bundesbank raised the growth projection for this year and next, last week, citing the strong labor market situation and rising household incomes. The bank forecast 1.8 percent growth for this year and next.
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