German business confidence gets boost

THE GERMAN economy has shrugged off the global credit crisis and the US economic slowdown to show a rise in confidence in March.

The closely watched Ifo index, based on interviews with 7,000 German managers, saw its third consecutive monthly rise in March to 104.8 from 104.1 in February.

"The results indicate that the German economy has been given a boost at the start of the year," said Prof Hans-Werner Sinn, president of the Ifo institute in Munich. "The outlook for the coming six months has also brightened somewhat."

The sub-indexes showed that managers were optimistic at the moment and were happy with their order books for the next six months. The expectations index for the next six months rose to 98.4 from 98.2 in February, while the business assessment index of current conditions rose from 110.3 last month to 111.5.

The optimism is present in the industrial sector, wholesale and even the troublesome construction sector; the only pessimism could be seen among managers in the retail sector.

The rise in the Ifo index, now at its highest level since last August, wrong-footed analysts, sure that confidence in Europe's largest economy would take a hit from the rising euro and financial market uncertainty.

Several analysts suggested that index indicated that the rebounding German economy has "decoupled" itself from the US economy, facing recession after a downturn in the housing market.

"German companies are currently giving the impression of being a supernatural and imperturbable species," said Andreas Rees, analyst of UniCredito, in an investor note.

The strong confidence will lower expectations that the ECB will cut interest rates in the near future, after cuts in London and Washington.