German economic sentiment improves but Brexit, trade risks weigh

BERLIN (Reuters) - German economic sentiment picked up in December, the ZEW research institute said on Tuesday, but it warned that fourth quarter growth was set to be subdued and cautioned of the risks to exports from Brexit and the international trade dispute.

The indicator showed sentiment picking up to -17.5 from -24.1 in November. That compared with a Reuters consensus forecast of -25.0. But the assessment of current conditions in Germany darkened to 45.3 from 58.2.

The mixed signals come as signs cluster of an approaching end to the decade-long boom in Europe's exporting powerhouse, which would be particularly vulnerable if tensions between Washington and Beijing grew into a full-blown trade war.

Achim Wambach, ZEW's president, said an increase in economic expectations should not be over-interpreted.

"The assessment of the economic situation has worsened dramatically for both Germany and the euro zone. This is indicative of relatively weak economic growth in the fourth quarter," Wambach said.

"Uncertainties also remain in terms of the looming international trade dispute and Brexit, which have a particularly negative impact on private investment and Germany's exports," he added.

German industry associations on Tuesday urged companies to prepare for a disorderly British exit from the European Union as British Prime Minister Theresa May was making the rounds of European leaders, seeking support for changes to her Brexit deal in a last ditch bid to save it.

(Reporting by Thomas Escritt; Editing by Michelle Martin)