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Business confidence hits new high in German surge

BUSINESS confidence in Germany has risen to a new two-decade high, with manufacturers and exporters upbeat as Europe's biggest economy motors ahead despite the debt crisis afflicting some fellow euro states, a survey showed yesterday.

The IFO Institute's monthly confidence index, a closely watched indicator, was up to 111.2 points for February from 110.3 in January. It was the ninth consecutive month-on-month rise, defying expectations of a slight retreat.

"The upswing in the German economy is robust," IFO president Hans-Werner Sinn said.

Managers' view of their current situation brightened markedly this month, and their outlook for the next six months was also slightly better.

Confidence among manufacturers, wholesalers and construction managers increased, and Mr Sinn said that "exporting firms once again anticipate stronger impulses from foreign business".

The German economy is still on the rise after rebounding strongly last year.

It grew 3.6pc as a recovering global economy fuelled exports and domestic demand showed signs of improvement. Somewhat slower, but still respectable, growth is expected in 2011.

The one weak spot in the IFO survey was retailing, where business confidence cooled somewhat on more sober assessments of the current situation -- even as the outlook brightened.


Harsh winter weather led to relatively weak economic growth of 0.4pc in the October-December period, but "the German economy should return to above-trend speed very soon", economist Carsten Brzeski said.

Exports will remain an important driver, and "the US recovery should more than offset any austerity-driven demand weakening in the eurozone periphery", he explained.

"Germany's increasing domestic strength is being boosted by interest rates that are much too low for its own economic conditions, and exports are remaining robust, supported by the moderate level of the euro," IHS Global Insight economist Timo Klein said.

The ECB's benchmark refinancing rate has stood at a record-low 1pc since May 2009, and appears unlikely to rise before late 2011.

The German economy should show "a very strong start to 2011 and stay robust during the year", assuming China in particular doesn't curb global growth momentum by taking tough action to keep inflation in check, Dr Klein added.

Irish Independent