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Business confidence takes another dip

The Local · 21 Apr 2011, 11:11

Published: 21 Apr 2011 11:11 GMT+02:00

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analysts' expectations.

The Ifo index of business sentiment fell to 110.4 in April from 111.1 in March.

Analysts surveyed by Dow Jones Newswires had on average forecast a drop to 110.5 points.

"Despite considerable risks at the international level, the situation of the firms in Germany remains excellent," said the institute's president, Hans-Werner Sinn.

The euro rose on the news as investors had feared a sharper drop. Although companies were more pessimistic about their future prospects amid higher oil prices and crises in Japan and the eurozone, an index measuring their sentiment about their current situation also rose.

Carsten Brzeski, an economist from ING bank in Belgium, said the markets should shrug off the April decline.

"Do not forget: even after today's drop, the Ifo remains close to record highs and bodes well for a continuation of strong German growth," he said.

"For the time being, fortunately, the German economy will continue to be (almost) everybody's darling," he added.

Before March's small dip, the headline Ifo index had posted nine straight monthly gains as confidence flew sky high in Germany amid strong economic growth and relatively low unemployment.

After suffering the worst recession for more than six decades in 2009, Germany has stormed back to economic health, registering its strongest growth last year since the country reunified in 1990.

Berlin last week upgraded its forecasts for growth this year, with the economy poised to expand by 2.6 percent. In 2012 the government expects slower, but still healthy, growth of 1.8 percent.

As the German economy has roared ahead, unemployment has fallen, boosting domestic demand in a country that has historically relied heavily on exports for its success.

There have nevertheless been some clouds on the horizon, with Germany's other major sentiment index, the ZEW indicator of confidence among financial market players, also falling recently.

Earlier in April this index fell by more than analysts had expected as Japan, unrest in the Middle East and spiking oil prices took their toll on sentiment.

Rising inflation and interest rates also threaten to take a toll on the German economic recovery, observers say.

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This month the European Central Bank raised interest rates for the first time since mid-2008 in a bid to contain inflation although ECB president Jean-Claude Trichet said it was not the start of a series of hikes.

"Quite a lot suggests the Ifo index will continue to fall in the coming months," said a more downbeat analyst, Ralph Solveen from Commerzbank.

The Ifo index is based on a survey of around 7,000 firms in Europe's top economy.


The Local (news@thelocal.de)

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Your comments about this article

03:34 April 23, 2011 by Ludinwolf
Just tell me why Germany doesnt give up of its predominant extreme conservative and start to make business with the BRICS. What i mean is expand Germany s business into the BRICS further than what germany has now...Chinese and South Koreans plus Indians are trying at all cost to establish relations with one another, while germany is confident that its products quality will reign forever.

I can t see the whole world consuming Mercedez, Bosch, MBW or other 'quality' stuff, but see how middle quality products will be the most consumed as people from emergent nations won´t buy a Mercedez but a Fiat, or the new chinese options for cars and tech products.

... or is just fear of change that makes Germany being so stubborn?
17:09 April 23, 2011 by lwexcel
If you are under the impression that Germany is not doing A LOT of business in the BRICS nations then you are very poorly informed.
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