GERMAN BUSINESS morale rose for a fourth month running in July, hitting its highest level since October and adding to signs that Europe’s largest economy is pulling out of its deepest post-war recession.
The Munich-based Ifo think tank said its business climate index, based on a monthly poll of some 7,000 firms, rose to 87.3 from 85.9 in June. A Reuters poll of 50 economists had pointed to a reading of 86.5.
The euro hit a session high against the dollar after the stronger-than-expected data, while Bund futures extended their decline to a fresh one-month low.
“We will have positive growth rates in the third quarter again,” said Ifo economist Klaus Abberger, adding that the easing pessimism was a sign that a turnaround had already begun.
Separate measures tracking businesses’ current conditions and expectations also rose.
The improvement in business sentiment chimed with other recent reports suggesting the economy may be stabilising after a record first-quarter contraction.
A purchasing managers’ survey (PMI) of private sector companies released earlier yesterday showed export demand for German goods and overall services was close to tipping back into growth in July.
Data released earlier this month showed May industry output grew at its fastest rate in 16 years, while orders surged.
“Germany has all of a sudden become the leader of the pack, showing stronger signs of stabilisation than most other euro-zone countries,” said economist Carsten Brzeski at ING Financial Markets. “Driven by a pick-up in global activity, it could soon be last in, first out (of the recession) for the German economy,” he added.
The German economy shrank by 3.8 per cent in the first quarter of this year in its worst quarterly performance since reunification in 1990. But a government official said earlier this month that gross domestic product may have been flat or even grown slightly in the second quarter, and some companies were showing positive signs.
“The breakdown shows that improvements were led by the long-ailing manufacturing sector and by wholesale trade,” said economist Timo Klein from Global Insight. – (Reuters)
