German business confidence posts record rise: Ifo

23rd July 2010, Comments 0 comments

German business confidence in July posted the strongest rise for 20 years, the closely watched Ifo index showed on Friday, as Europe's biggest economy motored out of recession.

The index of business sentiment in export-heavy Germany, whose economy shrank by nearly five percent in 2009, rose to 106.2 points from 101.8 points in June.

"The rise is the biggest since German reunification. Firms are reporting significantly more favourable business conditions than last month," the Munich-based Ifo institute said.

"The German economy is in party mood again."

The result was much better than expected, with economists polled by Dow Jones Newswires having forecast on average the index to have fallen slightly to 101.5 points.

Jennifer McKeown at Capital Economics said that the Ifo reading suggested that the German economy continued to perform well, not only compared with others in the eurozone but also with the rest of the world.

"One note of caution is that the recovery is still export-driven," McKeown said.

"Unless a German domestic demand revival starts soon, which seems unlikely given the coming fiscal squeeze, the positive effect on the rest of the eurozone will be limited."

© 2010 AFP

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