Tue, Nov 25, 2014 - Page 15 News List

German business confidence picks up after seven months

Bloomberg

German business confidence unexpectedly rose for the first time in seven months after Europe’s largest economy returned to growth.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, advanced to 104.7 this month from 103.2 last month. Economists predicted a decline to 103, according to the median of 41 estimates in a Bloomberg survey.

German GDP increased 0.1 percent in the three months through September after a contraction in the previous quarter, and investor sentiment climbed for the first time in 11 months this month. Even so, the pace of the recovery remains sluggish and the Bundesbank has said the economy will lack momentum at least until the end of the year.

“We see some stabilization, but I don’t see any reason for enthusiasm,” said Jens-Oliver Niklasch, a fixed-income strategist at Landesbank Baden Baden-Wuerttemberg in Stuttgart. “Well-known risks to the economy such as the crisis in the Ukraine haven’t really receded.”

Thousands of German companies are seeing business hit by EU sanctions imposed on Russia because of its involvement in a conflict in Ukraine. Zeppelin GmbH, a German machinery provider, says it faces a sales decline of about 40 percent in the two eastern European countries.

German manufacturing and services expanded at the slowest pace in 16 months this month. The economy is symptomatic of the muted revival in the euro area as a whole, which saw growth of 0.2 percent last quarter.

European Central Bank (ECB) President Mario Draghi said last week that policymakers would add stimulus to the region if needed to boost consumer prices and spur growth. In a flurry of activity since June, the ECB has cut interest rates, offered long-term loans to banks and bought covered bonds and asset-backed securities.

“We will do what we must to raise inflation and inflation expectations as fast as possible,” Draghi said on Friday.

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