Germany gaining in business confidence

PUBLISHED : Tuesday, 25 June, 2013, 12:00am
UPDATED : Tuesday, 25 June, 2013, 4:45am

German business confidence increased for a second month this month amid signs of a recovery in Europe's largest economy, even as the euro zone struggles to emerge from recession.

The Ifo Institute's business climate index, based on a survey of 7,000 executives, rose to 105.9 from 105.7 in May, in line with the median estimate of 46 economists in a Bloomberg survey.

A gauge of executives' expectations jumped to 102.5 from 101.6, though a measure of current business conditions fell to 109.4 from 110.

The survey comes after reports showing German investor confidence gained this month and industrial production jumped the most in more than a year in April.

The Bundesbank said last week that economic growth would show a significant acceleration in the second quarter, while warning of signs of a slowdown later in the year.

A weakening Chinese economy threatens to curb the global expansion and hinder the euro zone's recovery from a record recession.

Manufacturing in China, Germany's third-biggest trading partner, is shrinking at a faster pace, a preliminary reading of the Purchasing Manager's Index showed last week.

China's overnight repurchase rate, which climbed to a record 12.85 per cent on Thursday, tumbled for a second day yesterday on signs targeted injections of funds are being used to ease the cash crunch that threatens to worsen the slowdown in economic growth.

However, the Ifo index shows that "there has not been any overwhelming China angst among German companies," said Andreas Rees, chief Germany economist at UniCredit Research in Munich.

"German companies have been able to withstand the recent downward pressure coming from the Chinese economy. This is not a small achievement, given that both Chinese soft and hard data kept on coming in on a weak note in the last few months," Rees said.

Germany's economy expanded 0.1 per cent in the first quarter of this year after shrinking 0.7 per cent in the final three months of last year. Exports rose 1.9 per cent in April from March, data from the Federal Statistics Office showed this month.

The euro zone, Germany's biggest export partner, is struggling to emerge from six quarters of contraction, and companies are feeling the pain from the region's sovereign debt crisis.