German Business Confidence Improvement Signals Resilience
Germany’s ifo business confidence indicator climbed for the fourth month in a row in February, underpinned by stronger expectations, suggesting the resilience of the biggest euro area economy that may indeed avoid a modest recession.
The ifo business confidence index rose to an eight-month high of 91.1 from 90.1 in January, survey data from the Munich-based ifo institute showed Wednesday. Economists had forecast a score of 91.4.
“The German economy is gradually working its way out of a period of weakness,” ifo institute President Clemens Fuest said.
The expectations measure of the survey rose to 88.5 from 86.4. That was the strongest reading since February last year. Economists had expected a score of 88.3.
Meanwhile, the current situation index dropped for a second straight month, to 93.9 from 94.1 in the previous month. Economists had forecast a score of 95.
Morale grew to its highest level since May 2002 in manufacturing, driven by companies’ notably improved expectations.
Sentiment improved for a fifth consecutive month In the service sector as firms were somewhat more satisfied with their current business situation, particularly in hospitality and tourism. Further, they remained more confident about the coming months.
In trade, confidence continued to recover amid rising expectations and better satisfaction with the current situation among both wholesalers and retailers.
Satisfaction with the present situation led to further improved in the business climate in the construction sector. But, constructors expectations remained significantly pessimistic.
Recent data suggest the economic performance is better than expected with an easing in inflation due to lower energy prices. However, inflationary pressures remain high.
Economic confidence rose for the fifth month in a row in February, results of the ZEW survey showed Tuesday. Latest improvement was driven by a fourth successive increase in the assessment of the German economic situation, but the corresponding indicator remained deep in the negative territory.
Preliminary results from the S&P Global purchasing managers’ survey showed on Tuesday that Germany’s private sector grew for the first time in eight months in February, thanks to easing supply bottlenecks and reduced strain on demand.
Economists say it is too early to say the economy might escape a recession.
“Today’s Ifo index suggests that the worst for the German economy should be behind us,” ING economist Carsten Brzeski said.
“However, numbers don’t take away the risk of yet another contraction in the first quarter and, thus, a technical recession.”
The German economy is still miles away from staging a strong rebound, the economist added.
Official data released earlier on Wednesday confirmed that Germany’s consumer price inflation accelerated to 8.7 percent at the start of the year amid higher energy and food prices.
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