The German ZEW worsened in November to -28.5 from -27.4. The market was looking for an improvement to -25.0. The current conditions index, however, continued to surprise on the upside and leapt to 53.0 from 42.9, well ahead of expectations of 44.0. It seems that concerns over a US economic slowdown, looming VAT hike and Euro strength gained the upper hand over lower oil prices and buoyant equity markets.
The Current climate on the other hand was bolstered by spending ahead of the planned VAT hike. Elsewhere, EZ 3Q GDP fell to 0.5% on the quarter from 0.9% in the quarter before. This was slightly below market consensus of 0.6%, but the overall outcome has held up well given the sharp slump in French GDP to 0.0%. Over the year, this eased to 2.6% from 2.7% against market expectations of a flat outcome.
Although there is no breakdown to the data yet but it appears that growth was driven by higher investment. The ECB is likely to end its accelerated tightening pace and move back to 3-monthly intervals as opposed to the current two monthly mode with the next hike likely to materialise in March.
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