German business confidence rises in April: Ifo

24th April 2014, Comments 0 comments

German business confidence rebounded this month after a slight fall in March in Europe's biggest economy when companies worried about the Crimea crisis.

The Ifo economic institute's closely watched business climate index rose to 111.2 points in April against 110.7 the month before, beating market expectations.

Analysts polled by Dow Jones Newswires had predicted a slight decline to 110.5 points.

Christian Schulz of Berenberg Bank said the data showed German businesses had shrugged off their worst fears over a military escalation in the Ukraine-Russia crisis.

"The situation in eastern Ukraine remains volatile and dangerous and poses the most serious risk to the eurozone recover at the moment," he wrote in a note.

"But German businesses seem to estimate that the worst-case scenario of a war between Russia and Ukraine and escalating sanctions all the way to disruptions of Russian energy supplies to Europe remains unlikely.

"The Ukraine crisis is clearly far from over, but unless it escalates dramatically, it seems unlikely to leave more than a temporary dent in confidence, if at all."

He said the more upbeat mood came as "Germany is increasingly enjoying the benefits of its strengthening domestic demand as well as the broadening recovery in its most important export markets, the eurozone and other developed economies".

Ifo calculates its headline index on the basis of companies' assessments of their current business and the outlook for the next six months.

The sub-index measuring current business increased slightly to 115.3, from 115.2 in March.

The outlook sub-index, which had fallen for two months in a row, rebounded to 107.3 in April from 106.4.

Carsten Brzeski, chief economist at ING-DiBa, said the figures indicate that "currently German businesses stick to the facts and do not get concerned by eventualities".

"And the facts up to now speak a clear language. Order books, both domestic and foreign, are still growing, inventories are low and activity in both manufacturing and services is picking up."

He also pointed out an unusually mild winter had boosted construction in the first months of the year, making it "an important growth driver for the entire economy".

However, Brzeski warned that "despite today's surprisingly strong Ifo and the expected growth acceleration of the German economy in the first quarter, it would be foolish to turn a blind eye to possible downside risks".

"With the Ukraine crisis, Chinese uncertainties and emerging markets slowing down, more and more gusts of wind, particularly from the East, could easily disturb the current spring fever on the eurozone's island of happiness."

© 2014 AFP

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