Reply #11: German business confidence surges

[Ghost Dog]

http://www.ft.com/cms/s/f23fc672-f30a-11db-9845-000b5df10621.html

German business confidence has surged back to a level close to its all-time peak, according to a closely-watched survey that showed the strengthening euro has not had an impact on Europe’s largest economy.

The Munich-based Ifo institute’s business climate index, regarded as a good indicator of future trends in activity, rose much more than expected, reaching 108.6 this month, after 107.7 in March. That took it close to the peak of 108.7 reached in December last year. In spite of the euro’s rise, business had become more optimistic about exports, Ifo said.

“Germany is profiting particularly from the ebullient international investment upswing, which because of its specialisation is having a stronger effect on our country than in other large European countries,” said Hans-Werner Sinn, Ifo’s president. Against the dollar, the euro is close to its December 2004 peak of $1.3670.

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Robust German growth will strengthen the case for higher eurozone interest rates. The European Central Bank has signalled that a quarter percentage point rise to 4 per cent is likely in June.

Andreas Rees, economist at HVB in Munich, said the latest Ifo results were particularly striking as in the past “the euro exchange rate often acted as a kind of trigger for a strong and sustained downturn in business sentiment”. Continuing robust export growth would spill over into domestic demand, he added.

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