German economic confidence improved to a five-month high in December as investors expect the asset purchase program of the European Central Bank to boost recovery, the survey carried out by the Mannheim-based Centre for European Economic Research, or ZEW showed Tuesday.

The ZEW Indicator of Economic Sentiment rose a more-than-expected 5.7 points to 16.1 in December. This was the highest score since July, when it was 29.7 and also above the consensus estimate of 15.

“While the large influx of refugees is above all a major challenge facing policy-makers and civil society in Germany, the economic slowdown in emerging markets is exerting pressure on the German export industry,” ZEW President Clemens Fuest said.

“Overall, however, confidence is growing that the German economy is sufficiently robust to meet these challenges in the coming year,” Fuest added.

The assessment of the current situation remained largely unchanged in December. The current confidence index rose 0.6 points to 55.

Jennifer McKeown at Capital Economics, said the ZEW is particularly forward-looking and its softening over recent months comes alongside signs of a slowdown in the industrial production and new orders data, supporting the prediction that growth might slow as temporary boosts from falling inflation and the euro’s depreciation fade.

The economist said growth is likely to slow to about 1.2 percent in 2016 and the slowdown could be sharper if the euro fails to reverse its recent appreciation.

The economy should continue its current positive, though not breathtakingly strong, momentum next year, with possibly the biggest risks stemming from too low oil prices and the political side effects from the refugee inflow, ING Bank NV economist Carsten Brzeski, said.

The economic confidence index for the euro area climbed 5.6 points to 33.9 in December. Likewise, the current situation index gained 0.4 points to -9.6.

The material has been provided by InstaForex Company – www.instaforex.com