Written on January 21, 2011
German business confidence probably stayed at a record high in January as booming exports to Asia and stronger household spending bolstered growth in Europe’s largest economy.
The Ifo institute’s business climate index, based on a survey of 7,000 executives, probably held at 109.9 in January, the median of 41 forecasts in Bloomberg News survey shows. That’s the highest since records for a reunified Germany began in 1991. Ifo releases the report at 10 a.m. in Munich.
Germany’s economy expanded a record 3.6 percent last year as declining unemployment encouraged consumers to spend more and companies increased investment to meet export demand. German growth is driving the recovery in the 17-nation euro area as countries such as Ireland, Greece, Portugal and Spain introduce austerity measures to rein in budget deficits amid a sovereign debt crisis. French business confidence also rose this month.
“Clearly, Germany is the high-flyer of the euro region,” said Stefan Schneider, chief international economist at Deutsche Bank AG in Frankfurt. “We’re benefitting from strength in emerging markets while private consumption is supported by an extremely good development on the labor market. Germany will once again grow above potential this year.”
Ifo’s gauge of executives’ expectations probably eased to 106.5 from 106.9, the Bloomberg survey shows, while an indicator of the current situation may increase to 113.2 from 112.9. That would be the highest since December 2006.
Investor confidence jumped to a six-month high in January and the benchmark DAX stock index this week rose to the highest level in more than 2 1/2 years after companies reported higher profits. The index rose 0.3 percent at 9:30 a.m. in Frankfurt.
In France, an index of sentiment among factory executives increased to 108 in January from 102 in the previous month, national statistics office Insee in Paris said today. That’s the highest in almost three years fast cash.
Douglas Holding AG, Europe’s largest makeup and perfume retailer, said on Jan. 12 that annual profit rose 21 percent and first quarter sales increased as Germans boosted spending at the company’s bookstores and Christ jewelry outlets.
Germany’s Bayerische Motoren Werke AG, Daimler AG and Audi AG, the world’s three largest luxury-carmakers, will expand factories this year to ease capacity constraints driven by record demand for their vehicles.
German factory orders surged five times more than economists forecast in November, driven by demand from outside the euro area.
“Germany is benefitting considerably from the strong recovery of the global economy, especially in Asian emerging markets,” Bundesbank President Axel Weber said on Jan. 18. “Foreign demand is once again providing stronger impulses.”
At the same time, demand from within the euro area, Germany’s biggest export market, is declining as governments from Spain to Ireland cut spending to reduce excessive deficits.
Euro-area growth will slow to 1.5 percent this year from 1.7 percent in 2010, the European Commission forecast on Nov. 29. The Bundesbank predicts German growth will ease to 2 percent.
“While exports will slow, they’ll continue to contribute to growth,” said Jens Kramer, an economist at Nord LB in Hanover. Germany will continue to be the locomotive of the euro region.”