Investor confidence in Germany unexpectedly edged higher this month as hopes held up that growth in Europe's biggest economy will return, a closely watched survey showed Tuesday.
The ZEW institute's index, which measures investors' outlook for the next six months, rose to 48.5 points in March from 48.2 in February. It was the fourth consecutive monthly increase and contrasted with economists' prediction of a decline to 47.5.
Market experts are sticking to their forecast that "the economic situation in Germany is likely to improve over the next months," said the institute's president, Clemens Fuest. "As before, the eurozone debt crisis remains the biggest risk. This fact has been brought back to our attention over the last weeks."
ZEW said it surveyed 245 analysts between March 4 and this Monday — a period that covers the time after Italy's indecisive election but only the beginning of the fallout from a much-criticized bailout deal for Cyprus.
"The experience of the last years has shown that as long as the euro crisis is simmering on a low flame, the German economy remains a crisis beneficiary," said Carsten Brzeski, an economist at ING in Brussels.
"However, as soon as the crisis boils over and German businesses and consumers start to worry about the future of the eurozone, the economy also suffers," he said, adding that the ZEW survey suggests events in Italy didn't make investors believe the crisis would escalate.
The German economy shrank in last year's final quarter but is expected to return to growth in the current quarter — avoiding a recession. Business confidence has been rising and the DAX, Frankfurt's index of blue chip stocks, this month hit its highest level in more than five years.