German business sentiment
rose to its strongest in seven months in February, offering
fresh evidence that Europe's largest economy will dodge a
recession even as euro zone peers tighten their belts to fight
off the sovereign debt crisis.
The Munich-based Ifo think tank's business climate index,
based on a monthly survey of some 7,000 companies, rose to 109.6
in February, beating expectations for 108.8. That was its
highest since July 2011 and the fourth increase in a row.
The figures added to signs that Germany's economy would at
least avoid a contraction in the first quarter just as new
forecasts from Brussels predicted the euro zone as a whole would
shrink this year. The euro rose to a 2-1/2 month high against
the dollar in response to the Ifo numbers.
"At the moment it doesn't look like a recession. The German
economy looks robust, the domestic situation is particularly
stable," Ifo economist Klaus Abberger told Reuters.
But Abberger also said risks remained, pointing to rising
oil prices and a sovereign debt crisis that has engulfed Europe
over the past two years.
LITTLE BY LITTLE
Germany's traditionally export-led economy contracted in the
last quarter of 2011 as the debt crisis spread from Greece to
key euro zone trading partners, but indicators signal a
turnaround in 2012.
Economists now expect the economy to stagnate in the first
quarter of 2012, dodging two quarters of negative growth which
define a recession, before recovering from the second quarter
onwards.
A Purchasing Managers' Index brought concerns over the
outlook back to the fore, when the survey showed growth in
Germany's manufacturing and services sectors slowed in February.
Yet Ifo's subindex on expectations showed investors remained
confident. The reading rose to 102.3 from 100.9 in January.
"Solid economic fundamentals, recent indicators and –
despite all long-term worries – this week's Greek deal bode well
for at least a stabilization of the German economy," said ING
Bank economist Carsten Brzeski.
"Today's Ifo is further evidence that the German economy
only made a short stopover at the end of last year."
The responses to the Ifo survey were largely collected
before a meeting of euro zone finance ministers on Monday, in
which they sealed a second bailout package for Greece.
That is key to German companies who have not shrugged off
the Greek crisis altogether. Deutsche Telekom posted
a fourth-quarter net loss of 1.3 billion euros, dragged lower by
impairments on its activities in the United States and Greece.
"The confidence rebound in Germany continues amid a harsh
winter and Greek drama," said Christian Schulz of Berenberg
Bank. "The assessment of the current situation improved for the
first time since last June, a sign that improved confidence may
already have positive effects on economic activity."
An Ifo sub-index on the current situation rose to 117.5 from
116.3 in January.
