Thursday, June 24, 2010
German business shrugs off debt crisis
The Munich-based Ifo institute reported that its business climate index had risen from 101.5 in May to 101.8 this month - the highest level since May 2008.
The unexpected rise - almost certainly boosted by a weaker euro - highlights the robustness of the export-led upswing underway in Germany. It will help calm fears that Europe's economic recovery will be blown off course by fiscal austerity programmes and weaknesses in the continent's banking system. "The economic recovery is continuing," said Hans-Werner Sinn, Ifo's president.
Germany is under international pressure to support its economic recovery and to take steps that boost domestic demand and thus lift prospects across the 16-country eurozone. The Ifo index's increase is unlikely to deflect much of the criticism, however, especially as it is not yet clear how long the upswing will last.
The latest rise was driven by an improvement in businesses' assessment of current conditions. Expectations about the next six months sank back to levels last seen in March, suggesting that business fears growth will slow over the rest of the year.
Optimism among German industrialists has brightened recently on the back of a surge in orders, particularly from beyond the eurozone. German companies pride themselves on selling on the quality of their products, not just the price. But they have also drawn comfort from a fall of more than 8% in the euro on a trade-weighed basis in the past year.
"The German export engine is running smoothly, making Germany the economic powerhouse of the eurozone," said Carsten Brzeski, European economist at ING in Brussels.
Last week, the DIHK German chambers of commerce forecast Germany's economy to grow by 2.3% this year - with exports up by 10%. German companies have wound down government-financed short-time working schemes that helped avoid large-scale redundancies during the recession, and now falling unemployment is also helping boosting domestic demand.
However, growth in German gross domestic product in the second quarter of this year was boosted by a rebound in construction after a severe winter. Last week, the Mannheim-based ZEW institute reported German investor confidence had tumbled this month at a rate not seen since the collapse of Lehman Brothers investment bank in late 2008. That also pointed to gloomier times ahead.
This post is brought to you by: ESG-Network
e-Students Guide is a free education portal for students providing free education articles, resources, career counseling and latest jobs. Follow Us at Twitter, Facebook
Subscribe to:
Post Comments (Atom)