UPDATE 1-German investor morale rebounds on expectations COVID will fade

·2 min read

* Jan economic sentiment reading 51.7 vs 29.9 in Dec

* ZEW survey points to growth pick-up in coming 6 mths (Adds background)

BERLIN, Jan 18 (Reuters) - German investor sentiment surged in January on expectations that the incidence of COVID-19 cases will fall by early summer, allowing growth in Europe's largest economy to pick up in the coming six months, a survey showed on Tuesday.

The ZEW economic research institute said its economic sentiment index rose to 51.7 from 29.9 points in December. A Reuters poll had pointed to a rise to 32.0.

"The economic outlook has improved considerably with the start of the new year. The majority of financial market experts assume that economic growth will pick up in the coming six months," ZEW President Achim Wambach said in a statement.

"It is likely that the phase of economic weakness from the fourth quarter of 2021 will soon be overcome. The main reason for this is the assumption that the incidence of COVID-19 cases will fall significantly by early summer," he added.

Others are less upbeat.

Germany's BDI industry association said last Thursday it expected the economy to grow 3.5% this year, giving a more cautious forecast than the government as it warned companies could face another "stop-and-go year" due to the pandemic.

The government, in estimates published in October, predicted gross domestic product growth would accelerate to 4.1% this year from an estimated 2.6% in 2021.

The BDI said the Omicron coronavirus variant was clouding the growth outlook around the world, with Germany in particular being exposed to the risk of China, its biggest trading partner, becoming paralysed again if authorities there reacted to a renewed spread with its strict "zero COVID" lockdown measures.

The German economy failed to return to its pre-pandemic size in 2021 as microchip shortages hit production in the car industry and further COVID-19 restrictions slowed down the recovery in the final months of the year.

A ZEW index for current conditions fell to -10.2 points from -7.4. The consensus forecast was for a reading of -8.5.

(Writing by Paul Carrel, editing by Kirsti Knolle and Madeline Chambers)

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