By Geoffrey Smith
Investing.com -- Sentiment toward the German economy improved surprisingly in October, despite an increasingly sharp slowdown, according to the first of the month's major confidence indicators.
The ZEW think-tank's forward-looking economic sentiment index rose unexpectedly to -59.2 from -61.9 in September, thanks exclusively to improved expectations. The figure is notable because of ZEW's relatively good record in the past as an indicator of turning points in the fortunes of Europe's largest economy.
However, it stands at odds with an assessment of current conditions that has gone from bad to worse, falling by more than expected to -72.2 from -60.5 a month earlier.
As such, said ZEW President Achim Wambach, the overall outlook for the German economy "has deteriorated again."
While the war in Ukraine and the subsequent loss of Russian oil and gas supplies have hurt the country's key manufacturing sector in particular, there have been glimmers of hope in recent weeks as the government outlined plans to support the economy with up to 200 billion euros ($196 billion) in borrowing to cope with gas and electricity prices that have risen as much as tenfold this year.
On Monday, German Chancellor Olaf Scholz had ordered further steps to ease a looming power crunch by allowing three nuclear reactors that were due to be shut down by year-end to run through at least April next year. German baseload power futures for the first quarter of next year have nearly halved from their summer peaks as the government slowly shifted its position to allow the shift.
The same news helped drive benchmark natural gas futures in northwest Europe to their lowest in nearly four months on Tuesday morning in Europe. The Dutch TTF contract fell 9.9% to 127.98 euros a megawatt-hour, as traders priced in the greater availability of alternative power. Other figures continue to suggest that Germany - and Europe as a whole - has broadly succeeded in filling its gas storage facilities ahead of the peak winter season, despite the lack of Russian gas.
Data from Gas Infrastructure Europe on Tuesday showed that Germany's storage facilities are over 96% full, while the EU's have reached 92.3% of capacity.