LONDON: In separate news stories the BBC reports contrasting levels of confidence in Europe's two largest economies, Germany and Britain.

During December business confidence plunged to an eighteen-year low in the former nation, while in typically perverse Brit style UK consumer sentiment rose for the second month in succession.

Optimists (and government politicians) claim the UK data from market research group GFK NOP indicates that the recent cuts in value added tax and interest rates are working.

It's also likely that the Consumer Confidence Index received a temporary boost from recently released official figures for November showing a surprise increase in retail sales.

Says GFK NOP's Rachael Joy: "The index has improved again this month after the interest rate cut and the drop in petrol prices, but continues to hover at near record lows.

"The crucial question is whether the improvement in this index will be translated into activity on the High Street during the January sales."

  • Meantime, in Germany, business confidence sank in December to its lowest level in eighteen years, according to an index published by the Ifo Research Institute.

    The researcher's Business Climate Index, based on a poll of 7,000 firms, fell from 84.0 in November to 82.6 in December. It attributed the fall to the worseing world economic climate and its concomitant effect on German exports.

    Ifo also added that such a low reading had not been seen since German reunification in 1990. Moreover, not since 1982, when the nation was still divided, had there been such a weak business sentiment index level.

    Comments Helaba Bank economist Ralf Umlauf: "German economic prospects remain clouded and as such the new data is not surprising. Germany's GDP will continue to weaken and, so far, an end to the recession is not in sight.

    "Pressure on the European Central Bank to make further clear cuts in interest rates to fight against the crisis ought to increase because of this," he added.

  • Data sourced from BBC Online (UK); additional content by WARC staff