German Business Confidence Rises; Consumer Spending Stagnates

27 March 2002

The nation’s long-awaited recovery in business confidence appears to be under way, according to the respected Ifo Index. This rose in March from 88.5 to 91.8, its highest level in eleven months, bettering expectations and recouping all the ground lost since September 11.

But hats are not yet being thrown in the air, nor lederhosen slapped, as consumer spending has yet to match the upturn in business confidence. Without such rise, the improvement in the manufacturing economy will be unsustainable, economists warn.

According to Holger Fahrinkrug at UBS Warburg, there is little doubt the German economy is now beginning to revive. He cautions, however, that domestic demand will have to pick up considerably for a sustained and strong upswing. “Exports alone should be insufficient to achieve such strong growth rates and, more importantly, to sustain the recovery beyond 2003,” he said.

Data sourced from: The Wall Street Journal Online and (Germany); additional content by WARC staff