German business confidence rebounds

17th December 2004, Comments 0 comments

17 December 2004 , MUNICH - German business confidence recorded a surprise jump in December, a survey of 7,000 executives released on Friday showed, rebounding to its highest level in eight months and underscoring optimism that Europe's biggest economy will remain on a growth track. The Munich-based Ifo economic institute said its headline index for German business sentiment rose to 96.2 points in December from 94.1 points in November as relief about falling oil prices outweighed concerns about the impact

17 December 2004 

MUNICH - German business confidence recorded a surprise jump in December, a survey of 7,000 executives released on Friday showed, rebounding to its highest level in eight months and underscoring optimism that Europe's biggest economy will remain on a growth track.

The Munich-based Ifo economic institute said its headline index for German business sentiment rose to 96.2 points in December from 94.1 points in November as relief about falling oil prices outweighed concerns about the impact on exports of the strong euro.

The jump in December took analysts' by surprise who had predicted that the index, which is one of Europes key economic indicators, would slide to 93.8 points this month. The index stood at 95.3 points in October.

"In manufacturing, for the first time in four months, the business outlook was appraised more positively," Ifo president Hans-Werner Sinn said releasing the latest survey. "Export expectations were only slightly more unfavourable than in the previous month."

Indeed, the Ifo survey was undertaken as the euro hit a series of record highs against the dollar with the common currency climbing to a record high of USD 1.3469 earlier in December.

After losing ground to the greenback in recent days, the euro edged up following the release of the more upbeat Ifo report and was hovering around USD 1.33 in early European trading Friday.

Ifo said business confidence increased across all industries - manufacturing, construction, wholesaling and retailing - with those responding to the survey growing more optimistic both about future business trends and current business conditions.

While the index measuring business expectations rose to 96.4 points from 94.3 points, the component gauging current business conditions increased to 96 from 93.9. Economists had forecasts that both the current conditions and expectations components of the index would fall.

But in the last two months oil prices have dipped back by almost 20 percent after escalating to a record high of more than USD 55 and as a result raising hopes that the global economy will avoid slumping towards stagnation and that growth will now only slip back a notch in the coming months.

Moreover, the Ifo institute pieced together its December survey against the backdrop of a raft of key German data pointing to a surprisingly strong end to the year for the nation's economy.

The release of the institute's survey followed an unexpectedly strong German production data and factory orders in October, which have already pointed to a more upbeat fourth quarter after growth contracted sharply to a meagre 0.1 percent in the three months to the end of September as high oil prices undercut economic expansion.

At the same time, German retail sales surged by 2.3 percent in October and the GfK research group forecast consumer confidence in the country would edge up in December after shoppers' willingness to spend rose to a three-year high, consequently paving the way to a solid start to 2005.

Meanwhile, Germany's car industry association said it expects the nation's auto sales to rise next year for the first time since 1999.

Equally significantly, German exports have continued to defy the euro's steep rise to record a bigger-than-expected increase in October while another of the nation's key economic sentiment reports, the ZEW institute's investor confidence survey also unexpectedly rose in December.

Nevertheless, economists remain cautious about the outlook for the German economy with analysts tipping that the country's growth will slide back to about to 1.5 percent or lower next year after coming in about 1.8 percent in 2004.

This is despite the extra spending power consumers are likely to enjoy following the introduction next month of tax cuts totalling EUR 6.5 billion.

DPA

Subject: German news

 

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