German survey data improves ahead of ECB stimulus decision

AP News
|
Posted: Jan 20, 2015 7:37 AM

FRANKFURT, Germany (AP) — Europe's stagnant economy got two pieces of upbeat news Tuesday even as the European Central Bank prepares to launch more stimulus measures.

An index of market optimism in Germany rose more than expected in January thanks to cheaper oil and a weaker euro, while a survey of bank lending showed more demand from companies in the 19-country eurozone for loans to invest in new production.

The ZEW index rose to 48.4 points, up from 34.9 the month before and well above the 40 points expected by markets. The investment analysts surveyed in Europe's largest economy looked past market turmoil over the Swiss National Bank's decision to let the franc rise sharply.

The higher ZEW reading comes as the ECB's quarterly bank lending survey showed more companies were asking for loans to pay for fixed investment, a key stage in any economy's recovery. The ECB has tried to encourage lending by slashing its interest rate benchmark to 0.05 percent and offering cheap credit to banks so that they can then lend on to customers.

Europe has seen slack growth and high unemployment as it struggles to overcome a crisis over too much government debt. Most concern focuses on inflation of minus 0.2 percent, a sign of serious weakness that could turn into long-term stagnation. Inflation remains well below the ECB's goal of just under 2 percent considered consistent with a healthy economy.

Most bank observers expect the ECB to announce Thursday that it will start purchasing government bonds, a stimulus measure that pumps newly created money into the financial system. The aim is to raise inflation by lowering interest rates even more and increasing the amount of money circulating in the economy.