BLBG:German Business Confidence Unexpectedly Climbed in November
German business confidence unexpectedly rose from a 2 1/2 year low in November, signaling growth in Europe’s largest economy may rebound.
The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, climbed to 101.4 from 100 in October, the first gain in eight months. Economists predicted a drop to 99.5 according to the median of 48 forecasts in a Bloomberg News survey. French business confidence increased from the lowest in more than three years this month, a separate report showed today.
German growth slowed less than economists forecast in the third quarter even as the euro area, the country’s largest trading partner, slipped into recession and the outlook for the global economy dimmed. While companies are becoming more cautious and there are signs the economy could contract in the current quarter, the slowdown may prove to be temporary.
“That is truly surprising and a positive surprise but it certainly doesn’t mean German companies now expect a boom,” said Carsten Brzeski, an economist at ING Group in Brussels. “It’s more that they don’t want to join the chorus of the doom- gloom-merchants, they know we’re not over the worst, but that things will get better. Markets have calmed down and there are green shoots in the global economy.”
Ifo’s measure of executives’ expectations rose to 95.2 from 93.2 in October, while a gauge of the current situation rose to 108.1 from a revised 107.2. The euro rose as high as $1.2913 before retreating to $1.2906 at 9:45 a.m. in London.
German GDP
German growth slowed to 0.2 percent in the third quarter from 0.3 percent in the second, the Federal Statistics Office confirmed today. Exports, household spending and construction were the main contributors to growth, while inventories and company investment in plant and machinery subtracted from it, a detailed breakdown shows.
“The economy is currently influenced by a streaky overall picture that is likely to continue to darken by the end of the year,” the Bundesbank said in its monthly report this week. “The uncertainties stemming from the sovereign debt crisis are as much a concern as the mixed economic signals from other regions of the world.”
French Downgrade
The world economy will grow 3.3 percent this year -- the slowest since the 2009 recession -- and 3.6 percent next year, the International Monetary Fund said on Oct. 9, cutting its forecasts from 3.5 percent and 3.9 percent respectively. The Washington-based lender said it now sees an “alarmingly high” risk of a steeper slowdown, with a one-in-six chance of growth slipping below 2 percent.
France, Germany’s largest individual export destination, lost its top credit rating at Moody’s Investors Service on Nov. 19. Moody’s cited the country’s uncertain fiscal outlook and its “deteriorating economic prospects.” Standard & Poor’s, which stripped France of its top credit rating in January, said today there’s at least a one-in-three chance it will be lowered again next year.
French business confidence climbed in November after President Francois Hollande unveiled a payroll tax cut for companies that will go into effect next year. A gauge of sentiment among factory executives rose to 88 from 85 in October, national statistics office Insee said in Paris today.
‘Challenging Environment’
For now, companies may struggle to maintain their sales growth as euro-region nations from Spain to Italy toughen austerity measures. Germany’s Schaeffler AG, the roller-bearing maker that’s the biggest investor in car-parts manufacturer Continental AG (CON), earlier this week lowered its 2012 sales forecast because of weaker demand in Europe and Asia.
“We are forecasting a further decline in demand in the fourth quarter, which will result in a temporary adjustment to our capacities,” Chief Executive Officer Juergen Geissinger said. “We currently expect the volatile and challenging environment in key market sectors to continue.”
European Central Bank President Mario Draghi on Sept. 6 unveiled details of plan to buy government bonds to fight speculation of a currency breakup and regain control of interest rates in the euro area. That has helped boost financial markets and ease some concerns about the severity of the economic slowdown.
China’s factories showed the first sign of growth in more than a year, a survey of purchasing managers showed yesterday and U.S. policy makers are working on legislation to avoid $607 billion in automatic spending cuts which are due to take effect in January.
‘Growth Dip’
German consumer confidence will rise to a five-year high this month, according to market research company GfK, as rising wages and unemployment near a two-decade low outweigh economic concerns. The economy will expand 0.8 percent this year and next, the European Commission forecasts. By contrast, it predicts a 0.4 percent contraction in the euro area this year and growth of just 0.1 percent in 2013.
“Even though we’re expecting the economy to shrink in the fourth quarter, conditions should improve in the new year,” said Tobias Blattner, an economist at Daiwa International in London. “It’s going to be a dip in growth rather than a recession in Germany.”
To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
