German business confidence is stable: Ifo

24th May 2011, Comments 0 comments

German business confidence was steady in May after two months of falls, the closely-tracked Ifo index showed on Tuesday as companies gave their current situation an upbeat assessment.

The Ifo index was unchanged at its new level of 114.2 points as the research group adopted a new methodology that now uses 2005 instead of 2000 as the base year.

Analysts polled by Dow Jones Newswires had forecast a decline to 113.7 under Ifo's new accounting method, after peaking at 115.4 in February.

But "the business cycle traffic lights still signal 'green'," an Ifo statement quoted president Hans-Werner Sinn as saying.

In the retail sector especially, "the business climate index has risen markedly. The business situation of the retailers has clearly improved," Ifo said.

Two sub indices showed that the roughly 7,000 companies polled saw current conditions in a better light, with a reading of 121.4 points compared with 121.0 in April.

Expectations for the coming six months were "somewhat dampened" at 107.4 compared with 107.7, but remained positive nonetheless.

Ifo also incorporated changes in how economic sectors are classified in its new methodology.

In Germany's manufacturing sector, the overall business climate declined for the third month running, the result of lower expectations over the coming six months.

Sentiment in the construction sector was largely unchanged.

"May's Ifo survey suggests that Germany's impressive economic recovery might have a further to run," Capital Economics European economist Ben May said.

The poll was released after data provided by Germany's national statistics office showed that first quarter growth of 1.5 percent was based more on domestic demand than on the country's much vaunted export sector.

The first quarter jump from the last three months of 2010 surprised analysts and caused many to revise their 2011 German growth estimates higher to 3.0 percent or more, compared with the official forecast of 2.6 percent.

© 2011 AFP

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