German economic sentiment strengthened in December to its best level in 10 months amid hopes of falling inflation and a temporary easing in the energy markets, a monthly survey conducted by the Mannheim-based research institute ZEW revealed on Tuesday.

The ZEW Indicator of Economic Sentiment rose sharply to -23.3 in December from -36.7 in November. The reading was also much better than economists' forecast of -26.4.

Further, this was the third successive monthly rise in the ZEW index for the German economy that took the headline score to its highest level since the start of the war in Ukraine. Although the reading remained negative, it was the highest since February 2022.

Recent economic data suggested that the German industrial sector is showing resilience and that may help the biggest euro area economy to escape a recession at least in the fourth quarter of this year. The assessment of the current economic situation in Germany improved in the current ZEW survey. The corresponding index increased 3.1 points to 61.4 in December. The expected reading was -57.

"A large majority of the financial market experts expect the inflation rate to fall in the coming months," ZEW President Achim Wambach said.

"Together with the temporary easing on the energy markets, this is leading to a clear improvement in the economic outlook."

Financial market experts' expectations on the eurozone's economic development increased in December and the relevant index rose by 15.1 to -23.0.

The situation indicator also recorded an improvement, climbing 7.7 points to -57.4 points.

Inflation expectations for the Eurozone declined significantly in December, as the respective index fell by 27.1 points to -79.3 points.

The European Central Bank opted for 75 basis points hikes at each of the previous two policy sessions as inflation remained at or close to record high levels.

The central bank for the single currency bloc is set announce its next move on Thursday when the Governing Council, led by ECB President Christine Lagarde, is expected to raise interest rates by half a percentage point.

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