German business confidence to rebound

24th June 2004, Comments 0 comments

24 June 2004 , BERLIN – Growing confidence that Germany remains on track to an economic upswing appears to be helping to boost the business mood in the nation with a key indictor to be released Friday tipped top show sentiment among industry leaders in Europe's biggest economy picking up again in June.

24 June 2004

BERLIN – Growing confidence that Germany remains on track to an economic upswing appears to be helping to boost the business mood in the nation with a key indictor to be released Friday tipped top show sentiment among industry leaders in Europe's biggest economy picking up again in June.

Despite worries that high oil prices could push up inflation and consequently trigger interest rate hikes, Germany's Ifo report is forecast to show business confidence in the nation rebounding to 96.5 in June after it slipped to 96.1 points in May with an improvement in both the expectations and current assessment components of the index.

Drawn up by the Munich-based ifo institute and based on a survey of 7,000 executives, the Ifo business confidence report is considered to be one of Europe's prime economic indicators.

Reinforcing the prospects of a rise in the Ifo have been a series of European economic sentiment surveys released in recent days including a major survey tracking German investor confidence, which chalked up its first increase this year in June.

Based on a survey of about 300 German analysts and institutions, the so-called ZEW report is often seen as something of a curtain raiser to the Ifo report, especially the Ifo survey's component measuring future expectations.

At the same time, an official report showed confidence among Italian consumers edging up in June with Belgian's leading indicators released Wednesday reporting that economic sentiment in the nation had stabilised at well above the long-term average.

With Belgium having deep economic links to its eurozone partners its monthly indicators are seen by economists as providing an important barometer of economic life in the 12-member currency bloc.

The Ifo index is likely to show a further recovery in the mood among industry leaders and in particular in their expectations of future business trends, said Ralph Solveen, economist with Commerzbank AG.

Indeed, the release of the Ifo index comes in the wake of an unexpectedly strong showing by the German economy during the first quarter with the country posting a growth rate of 0.4 percent in the first three months of the year, which was higher than what economists had forecast.

The mood surrounding the Friday publication of the monthly Ifo report appears markedly different to the build-up to the release in recent months of the Ifo index, which has been accompanied by a string of concerns about the outlook for the global economy.

Worries earlier this year that a surging euro could derail the fragile economic recovery that had begun to emerge as Germany entered the new year were more recently replaced by alarm that soaring oil prices could cast a shadow over the world economic upturn.

Now, however, both the euro and oil prices have retreated from their record lows.

Moreover, the run-up to the release of the June Ifo report has been marked by private economists and economic institutes revising up their German growth forecasts to closer to two percent or even to two percent.

Further bolstering optimism about the outlook for the German economy have been a recent batch of data which showed factory orders surging by a better-than-expected 2.5 percent in April and production bounding ahead by 2.2 percent in April, which was double what economists had forecast.

German exports rocketed up by 4.6 percent in the first quarter compared to the final three months of 2003, helping to power ahead first-quarter growth by 0.4 percent. This was the strongest quarterly growth for the nation, which is also the world third biggest economy, since the first quarter of 2001.

So far, however, the scale of the pickup still appears to fall short of the impulse needed to help roll back the nation's record high unemployment levels.

Joblessness in Germany is currently stuck at more than 10 percent with the nation's tough labour market dampen consumer confidence and making consumer spending the weak link in the country's recovery.

As a sign of the continuing gloom among German retailers, Hermann Franzen, the head of Germany's Retail Traders' Federation (HDE) told the daily Frankfurter Allgemeine Zeitung Wednesday that his association expects retail sales to continue to stagnate in the country this year.

[Copyright DPA with Expatica]

Subject: German news

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