The headline ZEW economic outlook index rose a stronger than expected 14 points in January to -31 from -45.2. It was the third consecutive monthly improvement since the index bottomed in October (at 63). The index remains clearly below the series average of 26.5. The ZEW said that the German stimulus package and the ECB rate cut might have behind the improvement. The less important current situation index is still falling; in January to -77.1 from -64.5 in December. The ZEW index has lost some of its importance for markets, as its correlation with the IFO business sentiment index broke down.
Other: UK inflation drops sharply in December
December CPI fell by 0.4% M/M, the largest monthly drop since April 1992, but nevertheless far above the consensus estimate for a decline by 0.9% M/M. On a yearly basis, inflation slowed to 3.1% from 4.1% previously. The uncertainty about the CPI was due to the temporary VAT cut to 15% from 17% headline figure and its passing to customers. Core CPI dropped to 1.1% Y/Y from 2% Y/Y previously, undercutting expectations for a more modest decline to 1.3% Y/Y.
