German business confidence reports thirdly monthly increase

27th March 2008, Comments 0 comments

Despite a surging euro, a fresh outbreak of share market turmoil and high oil prices, the Munich-based Ifo economic institute said its monthly index rose to 104.8 points this month.

Berlin -- German business confidence rose for the third consecutive month in March, a key survey released Wednesday showed, adding to hopes that Europe's biggest economy will be able to withstand the fallout from slowing global growth.

Despite a surging euro, a fresh outbreak of share market turmoil and high oil prices, the Munich-based Ifo economic institute said its monthly index of 7,000 German executives rose to 104.8 points this month from 104.1 in February. The index stood at 103.4 in January.

Analysts had expect the closely-watched index would drop to 103.5 points in March in the face of the international economic uncertainty unleashed by the US mortgage market crisis.

"These results indicate that since the beginning of the year the German economy has gained strength," said Ifo chief Hans-Werner Sinn releading the survey.

"Despite the strong euro (manufacturing) firms are more optimistic regarding exports than they were in February. Their hiring plans indicate that the increase in staff levels will continue in the coming months," he said.

The surprise increase in the March Ifo index will also help the European Central Bank to resist pressure to follow the lead of the world's other major central banks and cut rates.

"The report underlines that there is little impact of the renewed financial market turmoil and the marked rise in the euro on corporate morale," said Elga Bartsch, economist with the US investment house Morgan Stanley.

The release of the latest Ifo survey helped to drive the euro higher Wednesday with the common currency edging up by 0.6 percent to 1.5725 dollars after gaining more than 17 percent against the greenback over the last 12 months.

The euro hit an all-time high of 1.5903 dollars earlier this month, while oil climbed above 100 dollars a barrel.

The March increase in the index also came in the wake of a record profit year for corporate Germany with the nation's chief executives saying they expect another bumper round of earnings in 2008 as the country's leading business sectors benefit from the boom in the world's leading emerging economies.

Germany's key engineering and electronics employer group Gesamtmetall said earlier this week that rising orders has resulted in job creation in the key export sector growing at its fastest pace in 40 years.

The rise in the March Ifo index followed an increase in both the survey's gauge measuring the current economic climate in Germany and the nation's business prospects for six months down the track.

While the Ifo index component assessing the business executives' view of the current economic climate rose from 110.3 to 111.5, the gauge for expectations increased from 98.2 to 98.4.

However, despite the optimism about Germany's economic prospects analysts are expecting growth in the nation to slip back a gear in the coming 12 months to below 2 percent in the wake of a slowing world economy. The German economy chalked up a 2.5 percent growth rate last year.

DPA with Expatica

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