By Maria Martinez
BERLIN, Jan 20 (Reuters) - German investor morale rose strongly in January to its highest value since August 2021, the ZEW economic research institute said on Tuesday, as expectations about Germany's economic situation improve.
The index rose to 59.6 points in January. Analysts polled by Reuters had expected the January reading to rise to 50.0 points, from last month's 45.8.
"The ZEW Index is rising strongly, 2026 could mark a turning point," said ZEW President Achim Wambach.
Alexander
Krueger, chief economist at Hauck Aufhaeuser Lampe Privatbank, said the government's fiscal package had fuelled some hope about the economy.
Germany's government has approved a surge in public spending targeting defence and infrastructure, hoping to close gaps in long-neglected areas of investment while reversing the economy's downturn.
"Despite the positive economic sentiment, work should continue to strengthen the attractiveness of the location in order to enable sustainable growth," ZEW's Wambach said.
TRADE TENSIONS COULD CLOUD THE OUTLOOK
The trade agreement between the European Union and the South American bloc Mercosur is likely to have improved the outlook for export-intensive industries, the ZEW said.
"However, concerns about transatlantic relations are growing, which could cloud the economic outlook, particularly in Germany," said Ulrich Wortberg, senior economist at Helaba. He was referring to U.S. President Donald Trump's threat to impose additional tariffs on goods imported from Germany and six other European countries unless they agree to his demand for ownership of Greenland.
Meanwhile, the ZEW's assessment of the current economic situation also improved, rising to minus 72.7 points from minus 81.0 points in the previous month.
Although that has made up for recent deterioration in sentiment, it remains poor, said Krueger.
"There is still no reason to fall into economic euphoria," he said, pointing to considerable location disadvantages and the risk of companies moving abroad.
(Reporting by Maria Martinez and Friederike Heine, additional reporting by Klaus Lauer, Editing by Ludwig Burger, Linda Pasquini and Emelia Sithole-Matarise)
