By Miranda Murray
BERLIN (Reuters) - German investor morale rose unexpectedly in September, the ZEW economic research institute said on Tuesday, in a sign that financial analysts are cautiously optimistic about the economy.
The ZEW's economic sentiment index rose to 37.3 points from 34.7 points in August, beating analysts' forecasts for 26.3.
However, the economic situation index worsened, dropping more than expected to -76.4 points in September from -68.6 the month before.
"There are still considerable
risks, as uncertainty about the U.S. tariff policy and Germany's 'autumn of reforms' continues," said ZEW president Achim Wambach.
The outlook had improved in particular for export-oriented sectors, which had recently suffered a strong decline, said ZEW.
Germany is the only one of the Group of Seven (G7) advanced economies that did not grow in the last two years as a series of challenges have stymied its recovery plans, most recently U.S. President Donald Trump's 15% tariffs on most EU goods.
Europe's largest economy shrank by 0.1% in the second quarter due to slower demand from the United States compared with elevated buying levels before higher tariffs kicked in.
Leading economic institutes trimmed their 2025 growth outlook for the German economy earlier this month on dampened hopes that Chancellor Friedrich Merz's new government - and a massive spending surge - could quickly turn things around.
"As long as the general conditions in this country do not change, hopes for economic recovery are likely to fizzle out," said Hauck Aufhaeuser Lampe economist Alexander Krueger.
"The global economy could prevent this if it were not currently so battered by tariffs and geopolitics."
The sentiment score is based on a survey of about 180 financial analysts at banks, insurers and industrial companies from September 8-15 who were asked about their mid-term expectations.
Within a range of minus 100 to plus 100, the score measures expectations on the country's future economic development.
(Reporting by Ludwig Burger and Miranda Murray; Editing by Andrew Cawthorne)
