German Confidence Bucks Gloomy Trend

28 January 2008

MUNICH: Business confidence levels improved in Germany during January, despite rising fears of a US recession and a fraught period of trading on global stock markets, according to figures from the Ifo Economic Institute.

The monthly survey of some 7,000 business leaders in Europe's largest economy saw confidence levels improve to 103.4 points from the 103 point level recorded in December; most analysts had forecast a decline to just over 102 points.

Expectations of business conditions in six months time also improved from 98.2 points last month to 99 points, although an assessment of the current situation fell from 108.1 points to 107.9 points.

German exports to the US are forecast to decline in 2008, but trade with Asian, Eastern European and Middle Eastern markets should redress the balance. Falling unemployment and improving salaries are  also boosting consumer demand.

While economic growth could fall below 2% in 2008, Ifo president Hans-Werner Sinn said: "On the whole, the condition of firms in German industry and trade continues to be robust."

Elga Bartsch, of Morgan Stanley, said the Ifo survey "underlines that fundamentally the euro area economy remains in good shape".

She warned, however, that "the headwinds are currently gaining momentum and, unless they blow over quickly, they will introduce downside risks to growth, inflation and interest rate forecasts".

Data sourced from Deutsche Welle (Germany); additional content by WARC staff